simply put
The maximum number of Bitcoins that can be mined is 21 million, and the final Bitcoin will be minted around 2140.
Once the circulation reaches its maximum value, Bitcoin miners will no longer receive block rewards.
Assuming no major changes occur to the Bitcoin protocol between now and then, they will be rewarded with transaction fees.
There will only ever be 21 million Bitcoins. That's it. Once they're all mined (which should happen around 2140), no new Bitcoins will enter circulation.
The Bitcoin blockchain is designed around the principle of controlled supply, meaning that only a fixed number of newly minted Bitcoins can be mined each year until a total of 21 million Bitcoins have been minted.
Once all 21 million bitcoins are mined, the network will operate largely the same way as it does now, but with one crucial difference for miners.
About every ten minutes, a new block is "discovered" by a Bitcoin miner, solving a cryptographic puzzle that allows the successful miner to add the newly discovered block to the blockchain. Each block contains a set of transaction records that were previously waiting in the Bitcoin memory pool, typically selected based on the size of the transaction fees they offer to the miner.
In return for finding a block, miners receive a fixed number of Bitcoins for their work, called a “block reward.” When Bitcoin was first launched, the reward was set at 50 BTC, but it is cut in half every 210,000 new blocks, ultimately about every four years.
As a result, over time, the block reward has been cut to 25 BTC, 12.5 BTC, and 6.25 BTC. Three halvings have been completed; the most recent Bitcoin halving occurred in May 2020, cutting the block reward to 6.25 BTC. The next halving is expected to occur in 2024.
Bitcoin miners will be able to continue to earn block rewards until a total of 21 million BTC have been minted, after which no new Bitcoins enter circulation. Currently, just over 18.5 million Bitcoins have been minted, equivalent to 88.3% of the maximum supply, minted in just ten years. But due to the halving process causing the creation of new Bitcoins to gradually decrease, it will take another 120 years for the last Bitcoin to be minted.
What will the miners do when all the Bitcoins are mined?
Once all 21 million bitcoins have been minted, Bitcoin miners will still be able to participate in the block discovery process, but they will not receive incentives in the form of Bitcoin block rewards. This is not to say that they will not receive rewards at all.
In addition to block rewards, Bitcoin miners also receive all fees spent on transactions included in each newly discovered block. Currently, transaction fees account for only a small portion of miners' income, as miners currently mint about 900 BTC (about $39.8 million) per day, but earn 60 to 100 BTC (about $2.6 million to $4.4 million) in transaction fees per day. This means that transaction fees currently only account for 6.5% of miners' income, but by 2140, this proportion will soar to 100%.
Simon Kim, CEO of venture capital fund #Hashed, said the loss of block rewards will not be a disincentive for miners. “Even after block rewards cease, changes in the Bitcoin ecosystem and its status as the key currency of the virtual world may drive significant changes in miner adoption,” Kim told Decrypt.
Transaction fees surpassed 2017 peak in April 2021
Indeed, moving to a reward structure based purely on transaction fees would now almost certainly destroy the mining network, as Bitcoin miners would be able to mine Bitcoin profitably if they received only 6.5% of the typical reward.
However, if usage of the Bitcoin network surges, competition for block space could increase dramatically. ByBit CEO Ben Zhou said this could lead to an increase in transaction fee rewards for miners, similar to what happened during Bitcoin’s 2017 bull run.
Will Bitcoin Mining Still Be Profitable in 2021?
Since dropping to $5,000 less than a year ago, the price of Bitcoin (BTC) has been on a rapid upward trend, with the leading cryptocurrency increasing in value by more than 340% in the last year. Meanwhile, the Bitcoin hash rate has increased by more than 41% in the last year, most recently reaching an all-time high in January 2021. In May 2020, Bitcoin also completed its third halving event, which saw the amount of Bitcoin mined cut in half each day. All of these factors happening simultaneously...
“With each halving, mining rewards decrease, and long before the last Bitcoin is mined, transaction fees will play an increasingly important role,” Zhou said. “Transaction fees will likely grow inversely with, and as compensation for, the diminishing returns of mining.”
Additionally, Eric Anziani, chief operating officer of Crypto.com, suspects that rising bitcoin prices and gradually decreasing energy costs may mean that mining will remain a profitable venture.
“We believe that as bitcoin and cryptocurrency adoption continues to grow, its price should also rise significantly, which will more than compensate for the lower reward per block,” he said. “In addition, as the mining process becomes more efficient and renewable energy becomes ubiquitous, electricity costs for miners will fall, allowing them to remain in operation and continue to secure the network.”
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