In many respects, Bitcoin resembles digital gold. Plainly because just like digital gold, Bitcoin cannot be generated offhandedly; it entails “extracting” labor. Whereas gold must be taken from the natural soil, Bitcoin must be “mined” by computational means.
However, there are other reasons to consider.
Issuance of all bitcoins has already been completed
Even though many people believe otherwise, block reward miners are currently unable to create any more bitcoins. Satoshi Nakamoto issued all of the Bitcoins in existence at the time of its introduction, making it impossible for miners to create any more Bitcoins.
Miners can profit from Bitcoins because the reward was established using a declining subsidy approach, and miners are paid in Bitcoin form. This reward is used to ensure that the protocol rules are followed.
In January 2009, the Bitcoin software issued all 21 million Bitcoins automatically. The Bitcoin system allows for the distribution of Bitcoins to legitimate miners who labor in the system.
The miners’ job is distribution rather than issuance.
Bitcoins obligatory essence
Because Bitcoin is both a financial and a technical phenomenon, it has some legal ramifications that aren’t well-known. It is critical to comprehend the legal issues that control Bitcoin since they contain a prognosis for how to deal with the cryptocurrency in the future.
Satoshi Nakamoto created a legally enforceable document for miners at the start of the Bitcoin issuance. This was an offer to anyone prepared to accept the conditions.
The miners were essentially enforcing the Bitcoin regulations by adopting the requirements therein. Satoshi Nakamoto promised to pay miners in the Bitcoin system by allocating Bitcoin block rewards automatically.
Once the miners accept the offer, they can immediately begin mining in the Bitcoin system, which accepts Bitcoins as payment. This is essentially how the Bitcoin contract works.
The bitcoin mining system is comparable to that of precious metals mining, such as gold, silver, and platinum. The monetary policy is deflationary on purpose.
Mining gold grows more difficult and expensive with time, and bitcoin mining follows a similar pattern. Bitcoin, like genuine gold, is a finite resource.
You can’t just print as many bitcoins as you want as the Federal Reserve does with fiat money. As a result, Bitcoin’s value is expected to climb over time.
At each Bitcoin Halving,’ the block reward will be decreased in half until it hits an infinitesimally small figure (close to 0). Its smallest possible value is 0.00000001. It won’t be half after that since extra decimal places can’t be recorded in a transaction.
This process is expected to continue until the year 2140. The total amount of Bitcoins in the year 2140 will be around 21 million. You’ve arrived at the asymptotic limit. You’ve run out of bitcoins to mine. So, what does this mean?
Most of the bitcoins would have been mined after a few halvings. Following that, relatively few sums of bitcoins will be mined as block rewards.
In reality, there will be fewer than 21 million bitcoins mined. People losing access to their wallets or even losing their private keys would have resulted in the loss of a considerable amount of bitcoins.
Such bitcoins would sit dormant in the wallet, unable to be accessed.
Is it possible to change the upper limit to 21 million? Yes, they can alter it in a variety of ways. They may increase it by a factor of two or three, or they could maintain it steady. Who knows what will happen!
They are free to alter the protocol in any way they see fit. Will that, however, be the genuine Bitcoin that was created in the first place?
That, I believe, will be a completely new bitcoin. Bitcoin’s essence will be lost if the cap is raised above 21 million. It will be a so-called “fake bitcoin.” Only one true Bitcoin can exist.
An intriguing hypothesis behind the number 21 million
Assume Bitcoin is widely adopted as a global currency. Will 21 million bitcoins be enough to cover everyone’s needs? Will the 21 million bitcoin supply be sufficient for everyone?
There is a hypothesis that can be used to answer this question. The worldwide M1 money supply was around 21 trillion dollars when Satoshi invented Bitcoin. Physical currency, demand drafts, traveler’s checks, other checkable deposits, and negotiable order of withdrawal accounts are all examples of this.
The value of 21 trillion dollars is now equal to 2100 trillion pennies. Bitcoin’s smallest unit is called Satoshi. One hundred million Satoshi’s are equal to one bitcoin. This indicates that only 2100 trillion Satoshi’s will ever exist.
This is roughly equivalent to the world money supply in pennies in 2009. Bitcoin will replace all fiat currencies and operate as the new global currency as a result of this convergence. Examine the bitcoin chart and current price to see how far it has progressed.
When all the bitcoins have been mined, what will happen?
We already know that 85 percent of bitcoins have been mined. Miners will receive no block reward when the last 15% of Bitcoins are mined. However, every bitcoin transaction that the miners receive is subject to a transaction charge.
As Bitcoin becomes more widely accepted and its value rises, the transaction fee will rise as well. It’s only a few hundred bucks right now, but it might grow to reach thousands of dollars in the future.
As we approach the 21 million bitcoin maximum, the transaction fee will become a larger share of the miner’s revenue. With time, transaction fees will become more prevalent.
Bitcoin’s creators have put in place meticulously calculated and researched rules to ensure that Bitcoin remains the monarch of all cryptocurrencies. In terms of market value and upgrading the current financial system, Bitcoin is the most popular cryptocurrency.
The flagship cryptocurrency is progressively becoming more mainstream, thanks to the investments of people like Elon Musk and other large corporate titans, and it appears that the Bitcoin value will only climb.