Only 21 million Bitcoins can ever be mined or unleashed into the market. Entering the world of cryptocurrencies, like Bitcoin, is going to be very different from traditional currencies you’re used to. Not only are transactions handled differently, but also there’s a limited supply of currencies like Bitcoin.
Of that 21 million, 17 million Bitcoins have already been mined. That leaves only four million left up for grabs by miners.
If you’re wondering what this limited supply of Bitcoin means, then you’ll want to explore Bitcoin further. Here’s a hint: Bitcoin’s prices are expected to rise in the future.
What Determines How Many Bitcoins Are Left?
You probably already know that the United States government regulates the circulating supply of U.S. dollars. For cryptocurrencies like Bitcoin, there is no centralized authority like a government that regulates the supply. Instead, the circulating supply is entirely determined by the users of the network.
The creator of the Bitcoin network—Satoshi Nakamoto—created 21 million Bitcoins that sit in a pool. To receive Bitcoins from this pool, miners have to solve complex equations to verify transactions. Once they verify a transaction successfully, they receive a Bitcoin reward from the pool.
Each block on the Bitcoin blockchain contains multiple transactions. The more blocks that are completed with each transaction validated, the more Bitcoins get released into the market.
This process has been working relatively smoothly since 2009. And it’s important to note that the supply won’t diminish as quickly as you might think. Nakamoto built “reward eras” into Bitcoin. This means that the amount of Bitcoins rewarded to miners gets cut in half every four years.
So, considering that there are only 21 million total and we’ve had a few reward eras already, how much longer will Bitcoin last? It’s estimated that there will be Bitcoins available for mining until the year 2140. This means that Bitcoin will likely still be around and thriving during your lifetime. In fact, it’s expected that the last Bitcoin won’t get mined for another 100+ years.
Effects on Bitcoin Miners
The future of Bitcoin isn’t certain. Bitcoin’s limited supply means that, as time goes on, miners will receive fewer rewards for their mining efforts. For most miners, the Bitcoin rewards they earn are essential for paying the costs to mine.
Some costs Bitcoin miners face include:
- Expensive equipment. You can’t mine Bitcoin without equipment that has enough processing power to solve complex math equations. This means you’ll need a lot more power than just your computer alone.
- Electricity costs. Once you’ve invested in Bitcoin equipment, you need to pay the electricity costs of running it. For some mining rigs, this can get very expensive.
- Mining fees. Bitcoin mining pools bring individual miners together to combine their processing power. To join a pool, miners have to pay a fee. For miners that have chosen to do cloud mining, they also need to pay a fee. (Cloud mining is when you lease processing power on someone else’s equipment. This equipment is kept at a remote data center. Fees are necessary to help the company that owns the equipment to keep everything running smoothly.)
When Bitcoin is completely mined, miners will have to rely on only transaction fees to support their mining efforts. These transaction fees get paid by those making a Bitcoin transaction. These fees go to the miner or miners that successfully validate the transaction.
Many critics of Bitcoin don’t believe these transaction fees will be enough to support the current and future network of miners. As a result, they believe that the Bitcoin network may collapse, once its supply of 21 million is completely mined. In this scenario, miners would leave the network because the costs of mining would be too expensive compared to the rewards.
While the collapse of the network is possible, you shouldn’t lose hope for Bitcoin just yet. There are others who predict that future technological advancements will help out Bitcoin miners with costs. This prediction is based on the idea that as technology advances it generally becomes smaller. This smaller size makes it less expensive. Therefore, technology may be inexpensive enough for miners to keep mining with only the transaction fee as payment.
Price of Bitcoin
The current price of a single Bitcoin is between $5,000 and $6,000 U.S. dollars. While this is significantly lower than at its peak (over $19,000 USD in December 2017), many have predicted it will rise even more in the coming years. This rise in price will likely be due to Bitcoin’s limited supply. As demand increases on Bitcoin’s limited supply, the price is expected to increase.
In addition to supply and demand, there are other factors that point to a rise in Bitcoin’s price in coming years. These include:
- Wider adoption. Over 100,000 merchants worldwide accept Bitcoin as payment. This includes Microsoft and Expedia. As Bitcoins become increasingly accepted by larger retail sites, demand for them may increase. For example, Amazon has registered cryptocurrency domains. This suggests they may be preparing to accept cryptocurrency as payment. When larger retailers accept Bitcoins, this gives consumers more incentive to join the Bitcoin network. As more consumers join, the price of the limited supply of Bitcoins will likely rise.
- More ways to utilize Bitcoin. Bitcoin may feel obscure to you, but people do use them for payment on a daily basis. In fact, bitcoin users buy coffee, home decor, and even electronics with the currency. One way users do this is by purchasing gift cards through Gyft. Users can purchase gift cards with Bitcoins to use at sites that don’t accept cryptocurrency yet. One popular store they do this with is Starbucks.
To see where you can spend Bitcoin in your country, check out spendabit. This website allows you to search for stores that accept Bitcoin, based on products. For instance, say you search for furniture on the site. Stores that accept Bitcoin for payment on furniture will show up. In this case, you’ll likely see listings from Overstock.com, which accepts Bitcoins.
As Bitcoin becomes more ingrained in our society, there are other factors that may affect its price. These factors include:
- Competing cryptocurrencies. If a competing cryptocurrency becomes successful, users may switch over to it. This can affect the demand for Bitcoin. Lower demand would likely yield lower prices.
- The exchanges it’s traded on. Users need to be able to exchange Bitcoin easily in order to use it. If exchanges drop Bitcoin for any reason, then that could affect how many people use it.
How Does Bitcoin’s Supply Compare to Other Cryptocurrencies?
Bitcoin was the first of its kind and paved the way for the thousands of cryptocurrencies that exist today. However, many of the other currencies that came after Bitcoin do not have the same limit of 21 million for their supply. This means that their prices may not rise the way Bitcoin’s are predicted to. Without a limited supply, it may also mean another cryptocurrency isn’t worth as much as a single Bitcoin.
Some cryptocurrencies that have larger supplies than Bitcoin include:
- Ethereum (ETH). Ethereum’s current circulating supply is over 100 million. Ethereum does not have a limit for their supply like Bitcoin.
- Ripple (XRP). The total supply of XRP tokens is roughly 100 billion, of which 42 billion are currently in circulation.
- Litecoin (LTC). Litecoin’s current circulating supply is over 60 million. Its maximum supply is 84 million.
- Stellar (XLM). Stellar’s current circulating supply is 19 billion. Its total supply is 104 billion.
- NEO (NEO). This cryptocurrency has a current circulating supply of 65 million. Its total supply is capped at 100 million tokens.
- EOS (EOS). This cryptocurrency has a current circulating supply of 944 million. It has a total supply of just over 1 billion.
- Cardano (ADA). This cryptocurrency has a current circulating supply of nearly 26 billion, out of a total supply of 31 billion.
There’s no way of knowing exactly what will happen in the estimated 121 years from now when it is expected that the last Bitcoin will be mined. Until then, you can rest assured that Bitcoin is here to stay with miners unlocking more each day.
As a small business owner, you’ll want to keep the latest Bitcoin trends on your radar. You never know: Your customers may want to pay you in Bitcoin in the near future.