According to statistics at the time of writing, 17.3 million BTC which is 82.55% of Bitcoin has been successfully mined and in circulation.
There’s a long way to go for the 21 million cap to be reached, with many reading this having no chance to witness the event. This is because of the reward structure of Bitcoin mining. Bitcoin’s Blockchain halves the reward for mining every 210,000 blocks. As of now, the block reward is 12.5 coins, and according to estimates will be 6.25 coins by 21 May 2020.
Currently, 1800 BTC are being mined per day. Therefore assuming the protocol stays constant and the supply is not increased, all Bitcoin will be mined by 2140 which is 122 years away.
Bitcoin being called digital gold is accurate given how both the assets have a limited supply.
Bitcoin Miners Point of View
Miners may find it less profitable to mine Bitcoin as the rewards start halving. Given the scope of technology progressing in the next 122 years, the cost of mining hardware and the cost of electricity may reduce drastically. Along with this as the Bitcoin mining rewards fall, the transaction costs which incentivise miners may rise to give them more reasons to keep mining Bitcoin.
Therefore once the supply cap is reached, the miners will only receive transaction fees. Satoshi Nakamoto, the creator of Bitcoin, had made it very clear when he/she wrote the whitepaper of Bitcoin.
The whitepaper states:
“Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.”
One point to note is the lightning network which is soon to be implemented, will result in higher transactions speed and lower transaction cost. Hence miners may not be incentivised solely from transaction fees. Further to this, the lightning network will result in addition to off-chain transactions which means miners do not need to validate, leading to much fewer transactions on-chain for a miner to earn transaction fees.
The variable in play will be the price of Bitcoin as and when the lightning network is being developed.
Price of Bitcoin
Will history repeats itself? When examining the past, the Bitcoin market adjusted itself to double when rewards were being halved. A year after the 2012 halving, the prices rose to $1,000 in November which was the highest recorded price during that time. Similarly a year after the next halving which occured in 2016, Bitcoin rose to $19,500 in mid-December of 2017.
As a response, it is noticed that in 2016 when Bitcoin halving last occured the price of Bitcoin doubled in response.
May 2020 is the next expected halving of rewards for Bitcoin mining, the chance of Bitcoin doubling in amount is almost guaranteed after a year which will be May or December 2021. The price of Bitcoin cannot be confirmed, but the way the cryptocurrency market is progressing expect an incredible rise in price in 2021.
In conclusion, the miners will rely on transaction fees when all Bitcoins are mined. Given the state of the rewards halving slowly, there is ample time for adjustments to be made for miners to get used to transaction fees as incentives. Satoshi Nakamoto’s model is well thought of as Bitcoin’s price levels have adjusted itself in a manner of increasing so that the miners will finally rely on transaction fees.
Bitcoin miners will work towards beneficial mining technology along with an increase in Bitcoin’s purchasing power. Both of which are looking positive given the tremendous advancements in technology and Bitcoin adoption worldwide.