What will bitcoin miners do when the limited supply runs out?

What will bitcoin miners do when the limited supply runs out?

Bitcoin It is just as famous for its limited supply as it is for its use of cryptocurrency mining for business, but mining for new bitcoins will eventually become unprofitable as the limited supply runs out. Satoshi Nakamoto, the mysterious creator of bitcoin, designed bitcoin to be a “hard” commodity like gold that central banks could not inflate away, requiring the creation of crypto mining. If mining becomes unprofitable, miners will shut down and the network will become more centralized, threatening the display of its core value.

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Every four years, Bitcoin’s “block reward” is halved, halving miners’ income and starting a two-year price hike. Starting at 50 BTC in 2009, the mining rewards have since fallen to 6.25 BTC per block, and by 2032, miners will receive less than 1 BTC. Since BTC has six decimal places to divide, the block reward will run towards zero every four years until it finally runs out in the year 2140. Bitcoin mining is energy-intensive and has some environmental impact, costing miners a small fortune to run their mining operations and entailing price increases to remain profitable .

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as such Decrypt With all 21 million bitcoins mined, bitcoin miners will have to rely on transaction fees to maintain their business model, which may or may not be sufficient depending on the extent of the demand for the blockchain. Since each block in the blockchain has a limited space and is generated (approximately) every 10 minutes, competition for block space can become fierce when the network is in high demand, leading to high blockchain transaction fees. Such exorbitant transaction fees are supposed to be the long-term solution to the long-term Bitcoin mining problem, but require that the Bitcoin mainnet be used only for high-value transfers, while low-value transfers must be handled through ‘layer-second solutions’ such as the Lightning Network.

The crisis will come much sooner than the year 2140

Most outlets discussing the future of bitcoin mining seem to assume that a mining crisis will strike after the last bit of bitcoin is mined, but miners are likely to face this crisis within a few decades. By 2041, bitcoin miners will compete to earn just under 0.2 bitcoins, and by 2061 the reward will be 0.006 bitcoins, requiring a multi-million dollar price tag (pre-inflation) to remain profitable at the same energy costs. Unless a power-efficient crypto-mining chip can be designed for Bitcoin, or green crypto-mining options become widely available, miners will have to rely on exorbitant fees or be forced to shut down their operations.

On the pessimistic side, if enough miners shut down, the remaining miners could form cartels to charge huge transaction fees and potentially give themselves the power to monitor transactions, which could completely collapse demand for Bitcoin and lead to the death of the blockchain. On the bullish side, miners have the ability to change the Bitcoin protocol if they can reach a majority agreement to do so, which could allow for a fixed cap increase on BTC or a shift from “proof-of-work” mining to “proof-of-stake”. Such drastic changes to Bitcoin’s underlying protocol and value proposition are highly unlikely unless there is a compelling reason for all miners to agree, as crypto miners are independent agents with individual beliefs and ideological convictions, and will only agree to massive change if the alternative is extinction.

Most people discussing this topic conclude with the position “It’s not our problem“, but this does not provide a good incentive for casual or serious investors to buy bitcoin as a form of multi-generational wealth if it is likely to collapse in on itself in the future. If the price of BTC does not rise into the millions, and if mining costs do not fall, bitcoin miners will be forced to Shut down en masse. If too many miners leave, Bitcoin will become centralized and corrupt, ending its underlying value proposition. This crisis could begin in only a few decades if profitability from Bitcoin Mining goes down so much that the network remains decentralized.

source: Decrypt

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