What happens when all Bitcoin are mined?

By around 2140, all 21 million bitcoin will have been mined. At this point, miners will no longer earn newly created bitcoin as rewards for processing transactions. Instead, they’ll rely solely on transaction fees paid by users. This shift could impact both transaction costs and Bitcoin’s broader economic dynamics.

Is Bitcoin truly scarce?

Bitcoin is unique in its absolute scarcity—there will only ever be 21 million coins, a limit enforced by its code. This fixed supply, combined with the halving process every four years, gradually reduces the issuance of new bitcoin. Over time, Bitcoin’s inflation rate approaches zero, making it a deflationary asset. Interestingly, due to minor rounding, the actual supply will end up slightly below 21 million.

This design fosters scarcity, encouraging people to value Bitcoin as a digital store of wealth. However, some skeptics argue that as miner rewards diminish, the network could face security challenges, while others question Bitcoin’s ability to function as a mainstream currency in a deflationary environment.

Bitcoin after the final Halving

Many worry about how Bitcoin’s network will remain secure once block rewards disappear. Here are several factors that may help maintain miner profitability and, consequently, network security:

• Transaction Fees as Incentives: Miners will rely on transaction fees as their primary income source. If demand for Bitcoin transactions rises, competition for block space will increase, leading to higher fees.
• Efficiency Gains in Mining: Advances in mining technology, particularly through more efficient ASICs, can reduce costs, helping miners stay profitable even with lower rewards.
• Strategic Energy Sourcing: Many miners set up operations in regions with cheap energy. Access to affordable, renewable energy sources could become a key factor.
• Difficulty Adjustments: Bitcoin’s difficulty adjusts based on the network’s hash rate. If some miners leave due to reduced rewards, difficulty decreases, allowing remaining miners to earn rewards more easily.
• Price Growth: Historically, Bitcoin’s price has surged following each halving. If Bitcoin continues to appreciate over time, miners could cover operational costs with the increased value of their earnings, even if their Bitcoin-denominated income shrinks. Despite these potential solutions, transaction fees alone may need to increase to keep miners engaged. However, not all transactions must occur on the main blockchain; solutions like the Lightning Network enable faster, cheaper payments off-chain, alleviating congestion on the main network.

Economic Impact of Bitcoin’s deflationary Nature

With its steadily decreasing inflation rate, Bitcoin is on track to become one of the hardest assets. By the 2024 halving, Bitcoin’s inflation rate was already below gold’s.

Bitcoin’s divisibility offers a solution: each bitcoin can be split into 100 million satoshis. As Bitcoin’s value rises, the purchasing power of smaller units increases, making Bitcoin practical even at high values.

Rather than discouraging spending altogether, Bitcoin’s deflationary model might shift consumer behavior. People may favor long-term savings and delayed gratification, similar to how technology has seen prices drop while quality improves. While this shift could impact certain industries, sectors focusing on long-term growth, like technology, might benefit from Bitcoin’s economic influence.

Final Thoughts

• Once all bitcoin are mined, transaction fees will be the sole income source for miners.
• Bitcoin’s scarcity, combined with rising demand, will likely boost its purchasing power and appeal as a store of value.
• With deflationary pressure, Bitcoin encourages a savings-oriented mindset.