Bitcoin has gained popularity as an investment in recent years, due to its unique design and underlying technology.
Part of what gives Bitcoin value is that it has a limited supply. There will only ever be 21 million bitcoins in existence, each of which can be divided into 1,000 millibitcoins (mBTC), 1,000,000 microbitcoins (μBTC), or 100,000,000 Satoshis. Additional bitcoins can’t be created, and existing bitcoins can’t be destroyed, they can only be lost.
The 21 million bitcoins are released into the market over time through the process of mining. When the mining process first started, a large amount of bitcoins were released, and over time, fewer and fewer bitcoins get released. It will take until about the year 2140 for all the bitcoins to be mined and available for trade.
Let’s dive into the details of how many bitcoins have been mined, the future of the bitcoin market, and what this means for investors.
Related: What is the Bitcoin trust?
The Basics of Bitcoin
The majority of bitcoins have already been mined. As of February 2020, 18.3 million bitcoins had been mined, leaving only 2.7 million left to be mined.
Bitcoin Mining
Bitcoin is a type of cryptocurrency that is released into the market through a process called mining (more on the mining process below). Anyone can become a miner and purchase computer equipment that solves complex mathematical equations.
As these equations are solved, they verify transactions on the Bitcoin blockchain. As a reward for keeping the bitcoin ledger up to date and verifying transactions, miners receive bitcoins as a reward.
How Many Bitcoins Are Mined Each Day?
Every 10 minutes, miners verify one block of bitcoin transactions. The current reward for this is 12.5 bitcoins. At this rate, 1,800 bitcoins are released into the market every day. However, approximately every four years, the reward for mining a block of transactions gets cut in half.
This is called a “halving” event, and last took place in May 2020. This essentially reduced the block reward to 6.25 bitcoins, meaning 900 bitcoins will be mined each day.
The halving events are the reason it will take until the year 2140 for all of them to be mined. When bitcoin mining first started, the block reward was 50 BTC per block, but each bitcoin was only worth pennies.
Once all the bitcoins have been mined, miners will still receive transaction fees as an incentive to keep their equipment running.
Lost Bitcoins
While the bitcoin supply is technically 21 million, about 4 million bitcoins have been lost forever.
Bitcoins can be lost if their owner loses the private key to a paper wallet or other cold storage wallet, or if the bitcoins are stored on a hard drive or wallet that gets lost.
The private key is required to send the bitcoins from one wallet to another, so without it, the bitcoins can’t be used or sold. Many bitcoins were lost in the early days of the cryptocurrency, because owners weren’t as careful when they were only worth pennies.
Cold storage wallets are the most secure way to store bitcoins, since they are offline and not held on an exchange, which is vulnerable to hackers. But it’s important to keep cold storage wallets in a safe place, as well as backups of the private keys, otherwise bitcoins can be lost forever.
Stolen Bitcoins
In addition to stolen bitcoins, thousands of bitcoins have been stolen over the years. In the Mt. Gox hack, 850,000 bitcoins were stolen, and in 2016, 150,000 bitcoins were stolen from Bitfinex exchange.
Although these bitcoins are still in the market, they generally aren’t in circulation—thieves likely don’t want to get caught, so they might hold them in wallets instead of selling them.
Bitcoin Whales
Just 1,600 people own 28% of the total circulating supply of bitcoins.
A small number of investors who bought into the bitcoin market early on own a significant portion of the available bitcoins. Investors who own enough bitcoin to affect the market when they buy or sell are called “whales.” About 1,600 people currently own about 5 million of the available bitcoins, approximately 28% of the total supply.
The creator of bitcoin, Satoshi Nakamoto, has held 1 million bitcoins in their wallet since the beginning, without ever moving any of them. Although some whales do sell and spend their bitcoins, they generally hold on to most of them, essentially taking them off the market.
Between the lost, stolen, and held bitcoins, that leaves only about 8 million bitcoins circulating in today’s market.
More About Bitcoin Mining
Every transaction that happens using bitcoins gets stored on a ledger called the blockchain. This ledger is similar to any bank ledger that keeps track of balances and transactions.
In order to ensure that the blockchain stays up to date and accurate, miners use computer equipment to solve complex equations in a process called mining. When these equations are solved, they verify transactions on the blockchain.
Why There Is a Limited Supply of Bitcoin
When Satoshi Nakamoto (which is a pseudonym and could be one person or a group of people) designed bitcoin, they decided to build in a limited supply. By limiting the number of bitcoins, this creates a built-in level of demand and value for the cryptocurrency.
If there were an unlimited supply of bitcoins, it would not have any value.
The limit was partially a response to the currency system of the U.S. dollar, which doesn’t have a limited supply. Since the U.S. dollar is controlled by centralized authorities, they can decide to print more money and take other actions that result in inflation or other economic issues.
If there were an unlimited supply of bitcoins, it would be difficult for the cryptocurrency to gain any momentum as a valuable asset. With a limit on supply, this creates demand.
Similarly, if all the bitcoins were mined within just a few years, excitement about the cryptocurrency might quickly die out, and it wouldn’t have a chance to be built out as an industry and viable currency.
How Bitcoin’s Supply Compares to Other Coins
One of the main differences between the various cryptocurrencies available on the market is their total supply and creation process.
To compare three of the most popular cryptocurrencies, Bitcoin has a total supply of 21 million, XRP (formerly called “ripple”) has a total supply of 100 billion, but slightly less than half of those are in circulation, and Ethereum (ETH) has no supply cap, with more than 110 million already in circulation. This makes bitcoins far more scarce than these other coins.
What Will Happen After All the Bitcoins Have Been Mined?
Once mining has been completed, potentially in 2140 if mining protocols don’t change, no new bitcoins will be introduced to the market. While miners will still make money in transaction fees, that fee may or may not be enough of an incentive for miners to want to or be able to continue their operations.
If transaction fees increase, buyers and sellers may be discouraged from using bitcoin as well. If miners no longer keep the network running, bitcoin might completely collapse, or it could shift toward being run by a centralized entity.
Some have argued that bitcoin’s supply cap will come up for debate over the next 100 years, or after 2140. If bitcoin actually becomes an important part of the global economic system, having a limit of 21 million coins could become problematic. Other parts of the bitcoin blockchain are likely to change as well in the coming decades, as they already have before.
There may be changes to processing times, transaction fees, hard forks, and other protocol changes. It’s possible that bitcoin will run entirely differently in 100 years, that it will have disappeared completely by then, or that it will still be functioning the same way it is today.
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