Excerpt
We've all heard the terms "21 Million" and "Halving" in relation to Bitcoin. But what does this mean and what happens once all Bitcoins have been mined?
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Picture this: its the year 2140. The last Bitcoin has been mined, and your fleet of 300 S99j Pro 10,000 terahash machines are running on nuclear and hydropower. What are you supposed to do now?? No more block rewards?
Well, while none of us will be around in 2140 to truly find out, we think miners will be sticking around. Here is why we remain optimistic for BTCs future, and how satoshi thought of everything.
Don’t Trust, Verify
Recently, the famous JP Morgan CEO Jamie Dimon expressed more skepticism towards Bitcoin. In a discussion with CNBC's Squawk Box on Thursday, he questioned the fixed nature of the total supply, stating, "How do you know it's gonna stop at 21 million? Maybe it's gonna get to 21 million and Satoshi’s picture is gonna come up and laugh at you all.”
Well Jamie, the total supply cap of Bitcoin is enforced by just 5 lines of code, which anyone in the world can verify.
As Jameson Lopp, co-founder of the Bitcoin wallet company Casa, points out here, Bitcoin is the first digital asset that has a mathematical scarcity and is verifiable by any member of the network. There will only ever been 21 million coins, and that is a fact.
2140 Outlook
Bitcoins mathematical scarcity is regulated by this algorithm in the source code that allows miners who create blocks to receive newly minted bitcoin, called a block subsidy, to cover the high costs of mining. Every four years, this subsidy is cut in half in an event called the halving. This process will continue until around 2140 when the flow of new bitcoin will stop. But does this mean all the miners will no longer have incentives to mine? Plus, since the total hashrate gives an estimate of the security of the blockchain, is Bitcoin's security threatened?
Not exactly, there several factors that allow miners to continue mining profitably and preserve Bitcoin security despite a halving. This includes:
- Transaction Fees
- Innovation
- Cheap Energy
- Difficulty Adjustments
Transaction Fees
Transaction fees are an important part of miner revenue that is often overlooked. They consist of the block subsidy, which is newly minted bitcoin, and the cumulative transaction fees paid in a block. This total is referred to as the block reward. While the block subsidy is cut in half, transaction fees are not. This means that the block reward falls by less than half.
Over time, as more people use Bitcoin, the demand for transactions on the network will increase, and fees are expected to rise to compensate miners. This is because there is a limited number of transactions that can be confirmed every ten minutes. To ensure that their transactions are confirmed in a timely manner, users must bid for the right to have their transactions confirmed.
Innovation
The technology used for Bitcoin mining is improving rapidly. ASICs, which are specialized microchips that help miners mine more efficiently, have undergone significant advancements since they were first introduced 10 years ago. If a miner is able to improve the energy efficiency of their operation and reduce costs, it can offset some of the revenue lost due to the halving. By 2140, this innovation will likely be much larger than what we can even imagine right now.
Cheap Energy
Bitcoin miners have the freedom to set up their operations wherever energy costs are low. This means that miners can operate in remote areas where other types of businesses would not be feasible, such as on an oil field, hydroelectric dam, or solar farm. At the pace things are going, by 2140, cheap or free energy might be limitless.
Difficulty Adjustments
Lastly, the way in which Bitcoin's mining difficulty algorithm works, it means that a miner's potential revenue is determined by their relative share of the total Bitcoin hash rate. As such, if other miners are forced to shut down as a result of the halving, miners who are able to remain profitable will see an increase in returns as their relative share of the total hash rate has risen.
Conclusion
Overall, it's clear that Bitcoin will still be relevant in 2140 and beyond. There are many more factors to consider outside of the block reward including transaction fees, innovation, cheaper energy, and difficulty adjustments. Just when people thought he didn’t think of something, Satoshi proves that he really did think of everything.
If you’d like to get started with your own mining operation, check out our listings from verified sellers across the globe.
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