There is a limit to the number of BTC that can ever be generated to 21 million. This is a hard restriction on Bitcoin, which was designed by Satoshi Nakamoto in order to regulate the inflation rate of Bitcoin.
It is definitely one of the factors that prompted the growth of the cryptocurrency and its bull cycle; however, because there is restricted supply and about 80% of the total number of Bitcoin tokens are already mined, the question remains what will happen with Bitcoin in the crypto community after the last Bitcoin is generated on the network. Let’s take a look at some of the possible consequences that will happen after the entire supply of BTC is gone.
The heart of the blockchain network is Bitcoin mining. Without the process of Bitcoin mining, there wouldn’t be any new BTC on the market, and in reality, the entire network will cease to operate. The network and the mining process were designed in a way that impacts the current supply of BTC.
More specifically, each miner on the network works to approve blocks of transactions that are 1 MB worth in size. One block is filled with BTC transactions, and in order to resolve the double-spending problem, the miners verify each block of transactions. For working to ensure that the network is secure, and transactions are also valid, each miner receives a block reward.
But, to make sure there is a stable rate at which new BTC is being generated, Nakamoto introduced two blockchain protocols that adjust the difficulty of the mining process and also influence the worth of the block reward.
Bitcoin halving is designed to halve the current number of BTC that is generated after 210,000 blocks are added to the system. Also, it simultaneously splits the block reward, which was originally capped at 50 BTC. After the last halving in 2020, the block reward was capped at 6.25 BTC.
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As we mentioned earlier, the difficulty of mining is adjusted based on the traffic of the network. When the total computing power in the blockchain system increases, the level of difficulty of the mining process instantly rises. This is programmed to happen after 2,018 blocks are added to the network, and again, it was designed to make sure that the rate of new BTC being generated remains predictable. This also means that the traffic of the network impacts the difficulty level of mining and the costs associated with mining.
When the entire supply of BTC is mined (by now, we already have around 3 million BTC left), the transaction fees will become the major source of compensation for the miners because, as we said, the only reason why the blockchain network works smoothly is that there are miners who work either alone or as a group in mining firms and pools to process and validate the transactions. So, the blockchain network will still rely on transaction fees that will probably become higher.
When it comes to the block reward, it will also cease to exist. This is another major factor that will prompt a rise in transaction costs. Otherwise, a lot of crypto supporters believe that when we reach this point, the price of Bitcoin will surge.