As bitcoin's supply would stop at 21 million, how will it impact the investors?

Vimal Joshi
Updated: 14 Dec 2021, 03:32 PM IST
TL;DR.

Over 18.77 million bitcoins already in circulation and less than 3 million left to be mined — a phenomenon credited to be one of the key drivers of cryptocurrency’s price rise. We decode this for you

By the early 2030s, 97 percent of the total number of bitcoins will get mined while the remaining fraction of 3 percent will likely take a century.

By the early 2030s, 97 percent of the total number of bitcoins will get mined while the remaining fraction of 3 percent will likely take a century.

A senior corporate executive has questioned the growth story of bitcoin, again! And thanks to his stature, his remarks can not be frittered away. He is Jamie Dimon, CEO of JP Morgan.

Dimon recently said the time is not far when the governments will start regulating digital currencies to prevent anti-money laundering, for tax and other purposes. At the helm of the largest US bank, Dimon has been a vocal critic of digital currency. He also said that bitcoins are worthless.

Importantly, he expressed his incredulity at the limited supply of bitcoins, which will be mined up to a maximum of 21 million coins, as per the algorithm that runs the cryptocurrency. It’s the finite supply of bitcoins, which is often cited as a reason for its price rise.

Let us understand what are the possibilities after 21 million bitcoins have been mined.

Maximum number capped at 21 million
 

The bitcoin protocol capped the supply at 21 million coins. As of August 2021, 18.77 million bitcoins have already been mined, which means only 2.3 million more will be mined. So, nearly 90 percent of bitcoins have already been mined.

By the early 2030s, 97 percent of the total number of bitcoins will get mined while the remaining fraction of 3 percent will likely take a century. This is in stark contrast to the fiat currency, which doesn’t have a limited supply. The Reserve Bank can print as much currency as it wants based on the nation’s needs.

The bitcoin proponents believe that it’s the increasingly rare supply of bitcoins that has been a reason for its price rise, and the phenomenon will continue to exist.

Aside from this, there is a reward for confirming the block of transactions. When the cryptocurrency was launched, the reward for confirming a block was 50 bitcoins. Every four years, the block reward stands to get halved.

 

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The total number of bitcoins has been capped at 21 million.

In 2012, it was reduced to half to 25 bitcoins, which further went down to 12.5 in 2016. Then again four years later in May 2020, bitcoin miners earned an award of 6.25 bitcoin for every new block.

When bitcoins reach that limit of 21 million, there is a possibility that miners might shift from block rewards to transaction fee as their main source of income. There are also some speculations that there could be changes in the protocol to allow further mining of more than 21 million bitcoins. After all, it is an open source code.

 

First Published: 14 Dec 2021, 03:32 PM IST
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