Currently, there are approximately 18.5 million Bitcoins in existence worth approximately $80 billion based on the current BTC price of $43,500 per coin.
But what happens when all 21 million coins are released?
When Bitcoin was created back in 2009, it was set up with certain protocols and rules. One of the more significant rules was that there would be a 21 million coin cap on the amount of Bitcoin that would go into circulation.
Also read: How do you mine Bitcoin?
Bitcoin is currently being released at a rate of 6 coins every 10 minutes. This coincides with a new block on the Bitcoin blockchain, which is also released every 10 minutes or so.
What’s a Bitcoin block? Why are 6 Bitcoins created every 10 minutes?
Bitcoin can be thought of as a digital currency, whereas the blockchain can be thought of as a digital ledger. It is a place where all buy and sell transactions of Bitcoin are recorded and stored. The digital ledger is decentralised, which means that it is not kept in one central server or location. Instead, identical copies of the ledger are stored on computers all across the Bitcoin network.
By keeping identical copies of the ledger on many computers, it is almost impossible for anyone to defraud or hack Bitcoin, as every computer in the network would need to be accessed and tampered with. It isn’t known exactly how many computers are on the network, but estimates are into the millions.
So who exactly records the buy and sell transactions onto this digital ledger called the blockchain?
This is where people called Bitcoin miners come in. The miners have very powerful computers and compete to solve a mathematical problem which when solved, gives that miner the right to write the next block of buy and sell transactions onto the blockchain (aka digital ledger).
There are approximately 1,500 transactions on each block and one block is created every 10 minutes or so.
So why do the miners want to win the right to confirm approximately 1,500 transactions and create the next block on the blockchain?
It’s definitely not for fun. The reason is that they are rewarded with Bitcoin.
For every block that is created by a miner, that particular miner receives exactly 6.25 Bitcoin as a reward.
At the current price of Bitcoin, one lucky miner is making approximately $270,000 every 10 minutes by being given 6.25 BTC which is created for them.
Sounds great but being a miner is tough work. Not only do you require extremely powerful computers, an enormous amount of electricity is consumed, not to mention the extremely high level of competition with other miners to win the right to create the next block and receive the 6.25 BTC and $270,000 reward.
So that’s how new Bitcoins come into existence. In simple terms, they are being created to reward the people who are supporting the network by writing buy and sell transactions on to the digital ledger known as the blockchain.
When will all the Bitcoins be mined?
Based on the current rate of mining and the Bitcoin rules that reduce the mining benefits over time (they halve every 4 years or so), analysts project that the full 21 million allocation of Bitcoin will not be fulfilled until 2140, which is still quite a long way off.
Of the 18.5 million Bitcoin current in existence, it is estimated that millions have been lost and will never be brought into circulation. This is because the owners have lost the password linked to their Bitcoin holding (known as the private key). Many early owners of Bitcoin have thrown out their computers from years ago that held their Bitcoin holdings when the price of Bitcoin was low.
Others have kept the computer, but the hard drive has failed and they cannot recover their Bitcoin holdings. Meanwhile, some have passed away and did not include their Bitcoin password in their will, and others still have unfortunately lost the piece of paper they wrote their Bitcoin password on.
With all this in mind, given the limited supply of Bitcoin and the likelihood that a large amount of Bitcoin has been lost, some Bitcoin investors argue that the price of Bitcoin has a bright future as supply is limited and is growing by only 6.25 coins every 10 minutes.
However, the demand may potentially continue to grow. But in any case, we don’t need to worry about hitting the 21 million cap anytime soon.
James Gerrard is a financial adviser and the co-founder of cryptocurrency investment research provider coincurrent.com.