Scarcity Is About To Kick In 85% of Total Supply Mined Leaving Only 3.15Mil. (#GotBitcoin?)
Bitcoin (BTC) now has 85% of its supply in circulation as of August 1, leaving just 3.15 million new coins for the next 120 years. Scarcity Is About To Kick In 85% of Total Supply Mined Leaving Only 3.15Mil. (#GotBitcoin?)
Bitcoin Has A Total Fixed Supply Of 21 Million Units
“Scarcity is about to kick in,” the crypto trading account known as Rhythm on Twitter commented on the event.
The current Bitcoin supply means only a maximum of 17,850,000 people can own an entire coin. In reality, however, some of the existing mined supply is not in circulation and never will be, as users lose access to private keys.
Estimates, such as those from blockchain research firm Chainalysis in 2017, have put the proportion of these lost coins at up to 4 million — or over 20% of the total supply.
Bitcoin Mining Competition Heats Up
Looking forward, May 2020 will see the next reduction in miner payouts — from 12.5 BTC to 6.25 BTC per block — an event which analysts consistently state will produce Bitcoin price increases.
Among those subscribing to the theory is analyst Filb Filb, who last month forecast that BTC/USD would not dip below $6,500 again thanks to miner support. In general, in the run-up to the halving, miners will exert considerably more influence over the Bitcoin price, he said.
Competition among miners is already fierce since Bitcoin began booming in 2019. As Cointelegraph noted, both network hash rate and difficulty continue to set new records as activity makes Bitcoin ever more secure for its users.
The 18 Millionth Bitcoin To Be Mined this Friday, Only 3 Million Left
The 18 millionth Bitcoin (BTC) is expected to be mined this Friday, American investor and co-founder of investment firm Morgan Creek Digital Assets Anthony Pompliano tweeted on Oct. 15.
Only Three Million BTC Left
Pompliano also noted that, at this point, there are only three million BTC left to be mined. The tweet asked to raise awareness about the world’s most well-known cryptocurrency:
“This Friday the 18 millionth Bitcoin will be mined. There are only #3MillionLeft. Let’s make this hashtag trend so the world can learn about Bitcoin.”
This initiative is not surprising from Pompliano, given that he said on CNBC’s Squawk Box that over half of his net worth is in Bitcoin in August. What he hints at is that so far 17,997,150 BTC have been mined — according to Bitcoin data website BitcoinBlockHalf — and the upper limit for how many BTCs there will ever be hardcoded in the system is 21 million.
Bitcoin’s Block Rewards Will Decrease
As the number of coins left to be earned by securing Bitcoin’s blockchain continues to decrease, BTC’s halving also approaches. The event will see the amount of Bitcoin created with each new block cut in half.
BitcoinBlockHalf estimates that on 14 May 2020 — the date is tentative, given the irregularity of Bitcoin’s block time — the block reward will be cut from 12.5 to 6.25 coins. The website also points out that 85.7% of all coins have already been mined.
As the number of coins that still have to be mined decreases, the competition to get hold of them seemingly increases. As Cointelegraph reported in late September, Bitcoin’s network hash rate has passed a record 102 quintillion hashes for the first time in the coin’s history.
With 18 Million Bitcoins Mined, How Hard Is That 21 Million Limit?
In a matter of hours, the 18 millionth bitcoin will have been mined and the world’s first cryptocurrency will draw one step closer to its hard-coded cap of 21 million coins.
“The pie is shrinking. This [milestone] gives people some simple math to raise awareness about where we’re at in the [bitcoin mining] process,” said Alex Adelman, CEO of bitcoin rewards platform Lolli, adding:
“It’s good for people to see the progress of bitcoin, to look back on everything that has been done and will be done for the next 3 million. … You should pay attention to the next 3 million.”
But don’t worry, you’ll have 120 years to do so.
The next 3 million bitcoins will be progressively slower to mine as a result of block reward halvings which occur every 210,000 blocks (or roughly four years) and reduce new bitcoin supply by 50 percent. The final bitcoin is expected to be mined in 2140.
Or Is It?
It seems blasphemous even to go there, given bitcoin’s value proposition as digital gold. But outsiders foresee a day when the 21 million cap might, gasp, come up for debate.
Eventually, once there are no more bitcoins left to mint, miners will rely solely on transaction fees, which are paid by users to transfer coins through the blockchain. This change gives cause for concern to some who view bitcoin’s block subsidies as integral to bitcoin’s incentive system.
To skeptics, this could undermine the structure that motivates miners to record validated transactions in the ledger.
“All of your assumptions about incentives, risk and value go out the window,” said Angela Walch, a research fellow at the University College London Centre for Blockchain Technologies.
“Please take the blinders off and stop assuming that everything will still work well once everything goes to a pure transaction-fees system as opposed to block [subsidy].”
Currently, with each block, miners get a subsidy of 12.5 newly created BTC, worth roughly $99,370, plus any additional transaction fees, which normally don’t total more than 1 BTC.
Along the same lines, Paul Brody, global innovation leader for audit firm Ernst & Young (EY), said bitcoin’s limited supply could limit the cryptocurrency’s utility as a global reserve currency.
Pointing to situations such as the Great Recession where monetary policy interventions were needed to lift the U.S. out of economic turmoil, Brody said:
“If bitcoin were to become a substantial part of the global monetary system, we would need to address [the hard supply cap] because a lot of economists agree deflationary systems are not necessarily the best thing.”
Both Walch and Brody suggested that bitcoin’s 21 million supply cap might one day be subject to change. What if?
“We need to acknowledge that the 21 million cap is aspirational,” said Walch. “If people decide to change that [supply] cap for certain reasons and enough people make that decision, the system will move to it. It’s aspiration, not reality.”
While technically feasible, a change to the supply cap would almost certainly be a non-starter for bitcoin users who cherish its gold-like properties. Indeed, bitcoin’s code has long been governed by a community with a bias toward retaining the coin’s original features as created by its pseudonymous founder, Satoshi Nakamoto.
Unlike ethereum, the world’s second-largest cryptocurrency, the bitcoin blockchain has rarely seen backward-incompatible, system-wide upgrades changing core code features.
In the rare instances it has, the bitcoin community has gone through fierce governance disputes – such as the infamous scaling debates of 2017, which centered on a potential increase to bitcoin’s block size. The philosophical rift ultimately resulted in the creation of bitcoin cash in August 2017.
Still, a prospective hard fork that would change bitcoin’s 21-million-coin supply cap is conceivable, if perhaps heretical.
“It’s not a given that bitcoin has to stay at that 21 million hard limit,” said EY’s Brody (who, it should be noted, is building enterprise applications on top of rival chain ethereum). “There is a governance mechanism to permit changes in bitcoin – if the community agrees that would be good.”
The Other Side
Even so, bitcoin advocate and author Andreas Antonopoulos stressed that governance drama surrounding bitcoin’s supply cap is nothing to lose sleep over – especially since bitcoin’s transition to a purely transaction-fee rewards model will take 120 years.
Antonopoulos added that from the very launch of bitcoin in 2009, mining was always “a marginally profitable endeavor” never intended to stay constant.
“[Mining rewards] dynamically adjust based on the network. … It’s a very complex economic environment. It’s not as simple as people think,” said Antonopoulos, adding:
“There are half a dozen variables that determine miner profitability [right now] including the cost of electricity, their access to bandwidth transaction, the block subsidy, the transaction fees at the time, bitcoin price, their local currency exchange rate, the type of equipment and how efficient it is at converting electricity into mining.”
As such, Antonopoulos says the concerns surrounding a transition from a block subsidy to purely transaction-based block rewards are grossly overblown.
“Nothing magical happens when block subsidy drops to zero,” said Antonopoulos. “It’s a very gradual and predictable change that happens over a period of 120 years. It’s already happening and every day [miners] make their decisions.”
While the 18th million bitcoin may not be the best reminder of the ongoing reality of a limited supply cap, the next upcoming milestone on bitcoin’s horizon assuredly will.
Viewing the next bitcoin halving as a far more notable event in bitcoin’s history, venture capitalist William Mougayar said:
“In my opinion, [the 18 million] milestone is not that significant in relation to the next halving which occurs May 2020. … On that date, the block [subsidy] will go from 12.5 BTC to 6.25 BTC.”
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