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Some experts believe that even after the final batch of bitcoins is mined, miners will remain crucial to the Bitcoin ecosystem.
On January 3, 2009, Satoshi Nakamoto mined the genesis block, minting the first 50 bitcoins in history and initiating an industry centered around cryptographic mining worth billions of dollars. However, due to the limited supply of bitcoins, the fate of miners after the last batch of bitcoins is issued remains unclear.
Bitcoin is generated through mining, a process that involves computer hardware solving complex mathematical problems and validating transactions on the blockchain network. In return for their efforts, miners receive a predetermined amount of bitcoins as a reward for each transaction block.
According to data from the Blockchain Council, over 19 million bitcoins have been awarded to miners as block rewards, while Satoshi Nakamoto's white paper specifies that only 21 million bitcoins can be obtained. Once this limit is reached, miners will no longer receive rewards for verifying transactions.
Nick Hansen, the founder and CEO of Luxor Mining, a Bitcoin mining company, stated in an interview with Cointelegraph that despite the disappearance of block rewards, miners will continue to play a crucial role in verifying and recording blockchain transactions, albeit with evolving compensation methods.
Currently, successfully validating new blocks on the blockchain rewards miners with 3.125 bitcoins, which according to CoinGecko's data, is approximately $203,125 USD (data subject to change). Miners also receive transaction fees.
According to calculations shared by the on-chain analytics company Glassnode in a tweet on May 1, since 2010, transaction fees and block rewards have brought miners over $50 billion in revenue.
Hansen believes that transaction fees will ultimately become the primary incentive for miners to continue mining Bitcoin after it has been fully mined.
"This is why understanding the dynamics of transaction fees and predicting their future becomes even more crucial as the importance of transaction fees in the Bitcoin mining economy gradually increases," he said, adding:
"Therefore, it's important to see fees increase over time, such as recent Bitcoin halvings have helped with."
However, considering that current miners may not be alive when the last Bitcoin block reward is mined, this transition may still take several years.
Waiting for answers will take a long time.
According to Hansen, based on the rate of block discoveries and the halving process that occurs approximately every four years (or every 210,000 transaction blocks), the last bitcoin is most likely to be mined around 2140.
Bitcoin halving is a process of predetermined reduction in the rewards received by miners, with the most recent one occurring in April 2024. This will reduce the reward per block to 3.125 bitcoins.
In theory, by limiting the supply of Bitcoin, the value of each coin should increase as demand grows and supply remains fixed. Hansen suggests that by 2140, the price of Bitcoin will depend on factors such as market demand, regulatory environment, technological advancements, and macroeconomic factors that are unpredictable.
"Having all bitcoins in circulation could create scarcity, but whether this scarcity will translate into price increases depends on market dynamics," he said.
"It's important to remember that Bitcoin's design considers this outcome when looking at the future where all bitcoins are mined. The gradual reduction of block rewards and the shift towards transaction fees are inherent attributes of the protocol, representing a clever solution to ensure the continued security and viability of the network," Hansen added.
Jaran Mellerud, a research analyst at Hashrate Index, told Cointelegraph that as Bitcoin adoption and usage grow, transaction fees will increase significantly and become the primary source of income for mining companies.
Mellerud stated that by the time the last bitcoin is issued, block subsidies will be very small and will not have a significant impact on Bitcoin supply.
"Due to the massive demand for block space relative to the scarce supply of block space, transaction fees must increase significantly in future scenarios where Bitcoin is heavily used," he said, adding:
"If you don't believe there will be high enough transaction fees in the future to justify mining, then you don't really believe in Bitcoin."
When the last bitcoin is mined, Mellerud believes its value will not be measured in US dollars or other fiat currencies.
He speculates that by then, the fiat currency system will have collapsed, and Bitcoin may become the successor, becoming the global standard unit of account.
"In such a scenario, the only effective way to measure the purchasing power of Bitcoin is to see how much energy one bitcoin or one satoshi can buy," Mellerud said.
"Just as we currently use energy, such as barrels of oil, to measure the purchasing power of the US dollar," he added.
For a long time, people have been predicting the collapse of the fiat currency system, mainly due to the many problems facing traditional financial systems. In March 2023, Silicon Valley Bank collapsed due to a liquidity crisis, followed by Signature Bank and Silvergate Bank.
Before the banking crisis in March 2023, a February survey conducted by the business intelligence company Morning Consult for the cryptocurrency exchange Coinbase found that most respondents were already disappointed with the global financial system.
Pat White, co-founder and CEO of Bitwave, told Cointelegraph in an interview that miners will still be a crucial part of the ecosystem, but not all miners will survive, as some will face increasing costs.
According to a report by Glassnode on March 24, miners have experienced long periods of unprofitability since 2010, with only 47% of trading days being profitable.
White said, "I think we might see some miners shutting down or using other manipulation techniques to increase fees," adding, "But I also imagine this could happen before the last bitcoin is mined because the last few halvings will reduce block rewards to the level of satoshis."
However, White also said, "A lot can happen in 120 years," and Bitcoin may undergo fundamental changes in the next century.
White believes that by 2140, quantum computers may have already cracked the core encryption of Bitcoin, although he said engineers working on this have long known it's not quantum-safe.
"People don't have to panic about this quantum safety issue. From now until 2140, Bitcoin will need a massive overhaul at the encryption level," he said.
"By then, the Bitcoin developer community will be able to evaluate whether we're really moving towards a network based on transaction fees or whether additional Bitcoin mining is needed to ensure network security," White added.
White further speculated that although Satoshi Nakamoto's white paper states the supply limit of Bitcoin as 21 million BTC and this is the most solid provision, by 2140, none of us may still be alive to enforce this provision.
He believes that cryptocurrencies boil down to coding and consensus; if the community feels that transaction fee incentives are insufficient to maintain network security, future miners could theoretically extend Bitcoin's hard cap to more than 21 million.
It's unclear what impact this may have on prices, but regardless, White believes that the price of Bitcoin will stabilize at a price point reflecting global inflation, and major price changes will occur within the next 120 years if one or more countries seriously adopt it as their reserve currency.
In that case, he said this would "likely be independent of Bitcoin's mining progress," and this would be the most certain time to boost BTC prices.
"We can't even imagine what could affect Bitcoin — obviously there are wars and energy crises — but what if we really are a multi-planetary species by then, and we have to extend block production time to support solar system-level communication speeds?" White said
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"I've always thought it's important to focus on the most difficult problems we see today and do our best to solve them. This may mean solving payment issues or digital ownership, or providing banking services to the unbanked — these are the issues that need attention now," he added. |
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Post time 30-4-2024 21:01:10