The cryptocurrencies like bitcoins are a store of value and are comparable to gold in plenty of ways. Just like bitcoin that cannot be created or made, it is required to be extracted. Like gold is extracted, the bitcoins are mined in technical terms. Bitcoin is a digital currency created by Satoshi Nakamoto in 2009 at the time of the financial crisis. His main motive was to create a currency that is independent of government. Bitcoin is a computer code, and unlike fiat currencies, it has a finite supply, i.e., 21 million.
There will be only 21 million that will ever exist in the world of cryptocurrencies. The supply of bitcoin is fixed, and one block of bitcoin transactions is mined every 10 minutes. Even if all the bitcoins are mined, the miners will still carry out the process of mining bitcoins and processing transactions by charging fees. The miners are the specialized computers that solve the blocks of transactions and add them into a chain of blocks known as the blockchain. To start trading in bitcoin and get a more exciting option, you must research about Bitcoin Union.
If you are a beginner, you might not know about blockchain. The blockchain is a distributed public ledger that records all the bitcoin transactions and makes them transparent to the world. This ledger is completely transparent but also maintains the anonymity of users. We will explore more about the supply and mining of bitcoin in this article.
Supply of Bitcoin
In reality, there are 21 million bitcoins that are ever created and need to be mined. When miners reach the target of mining 21 million bitcoins, the supply of it will exhaust. It might be possible that bitcoin’s protocol can be changed, and there would be more supply of it. Most people want to know what will happen when 21 million bitcoins are mined and debating. As of 2020, there are 19 million bitcoins that have been mined and are in circulation. There are only two million bitcoins that are not introduced and are not in circulation.
It is important to note that there are 21 million bitcoins that are created, but there are many people that have lost their wallets and private keys or have died without letting anybody know the private key. It might be possible that there are fewer amounts of bitcoins that are currently in circulation.
Rewards for bitcoin mining
When bitcoins were created, Satoshi Nakamoto, the founder of bitcoin, set the protocol for bitcoin miners to be provided rewards for their hard work. At the time the first bitcoin token was mined, the reward of mining was 50 BTC, but the protocol was maintained, which says that the bitcoin reward will be halved every four years. Over time, the reward of bitcoin mining started to lower down as in 2009, the reward of bitcoin was 50 BTC in 2021, it was halved to 25 bitcoins, and as of 2020, the reward is halved to 6.25 bitcoins. The main motive behind halving the reward rate is to lower the inflation rate of bitcoin.
The reward will be halved every four years until all the bitcoins are mined. The crypto analysts estimate that the final bitcoin will be mined by the year 2140.
What is the impact of a limited supply of bitcoins on miners?
There is a positive impact of a limited supply of bitcoins on bitcoin miners because it has given miners a way to earn bitcoins. Instead of using fiat currencies to buy bitcoins, miners can invest in hardware and can earn the newly created bitcoins as rewards. Even till the last bitcoin is mined, the miners will actively participate in the mining process and do the work of validating the bitcoin transactions. In every bitcoin transaction, a transaction fee is attached, and this fee helps in raising many blocks, which will make the blockchain grow over time. With more chains, the price of bitcoin will also rise.
Before anyone enters into the mining process, it is crucial to learn about the hardware required and how you need to mine bitcoins to earn the reward.