In its current setup, Bitcoin is a finite resource. This means there are only so many Bitcoin that can be obtained by Bitcoin miners. The golden number is 21 million. This begs the question: What happens when all of the Bitcoin get mined? To fully understand what happens, it is important first to get a basic understanding of what Bitcoin is and how it is mined. Then the rest will make perfect sense.
How is Bitcoin Mined and Where Does its Value Come From?
Bitcoin is a cryptocurrency. This means that the way it is mined is through a digital, mathematical process. Think of it like this: Gold is valuable because it is rare and hard to get. You don’t see gold lying on the ground or on the beach. If you did, it would be as worthless as other stuff lying on the ground. Miners have to dig and excavate and spend millions on huge equipment and technology just to get gold. Hence, it’s worth a lot. Bitcoin fulfills the same two requirements that gold does: it is rare, and it is hard to get. The rarity of Bitcoin comes from the fact that there are only 21 million Bitcoin that can be mined. That is a minuscule number. Imagine if there were only 21 million dollar bills in the whole world and how much each one would be worth. A lot. And why is Bitcoin hard to get? Simply put, each Bitcoin is obtained, or mined, by solving extremely complicated math problems. It takes a powerful computer to solve the problems, and the computers are expensive and consume a lot of electricity. So you need the right computer with the right programming and electrical costs at a certain amount to even attempt to mine bitcoin.
What Happens to the Value of Bitcoin After All 21 Million Are Mined?
With any finite resource, when the amount available goes down, the price goes up. That’s why we have seen Tickle Me Elmos going for as much as $5,000. People wanted them, and there weren’t many left. At first, this may happen with Bitcoin. However, it is more likely it will rise in price before the 21 million are all mined. Why? Because Bitcoin miners make money in two ways: 1. selling Bitcoin and 2. through Bitcoin fees. A Bitcoin fee is incurred during the transaction when the transaction is smaller than a certain size. Recently, the fees have been going up. If it weren’t for the fact that miners can make money off fees, the mining could slow down to the point where Bitcoin starts to get overtaken—and replaced–by other cryptocurrencies. So the fees will always be there to encourage miners to keep mining, even as it gets more difficult.
Higher Fees Means Lower Value of Bitcoin
If you want to buy something and there’s a fee attached to the transaction, you have to pay for two things: the item you’re buying and the fee. If the fee goes up too high, you’re not going to want to buy the item unless its price goes down. It’s going to be the same with Bitcoin. When fees start to get too high, the price of Bitcoin will have to drop in order to make it so those using Bitcoin can still afford to buy things with it.
However, at the current rate, it will take 122 years for all 21 million Bitcoin to be mined. So unless something drastic changes, this should not be an immediate concern. However, it would be wise to keep up with new developments regarding fees because this may affect Bitcoin’s post-21-million fate.