How Many Bitcoins Are There?
Do you wonder what’s one of the main differences between fiat and BTC?
When it comes to fiat currencies, they are in the hands of governments or central banks that issue them. In other words, they control the total supply and the amount of money in circulation. Bitcoin’s total supply, on the other hand, cannot be controlled by one entity – it’s fixed, and no one can really do anything about it.
Bitcoin’s total supply is capped at 21 million. Once all 21 million are brought into circulation, mining will become unprofitable as no more coins will be left to mine.
Bitcoin isn’t the only finite supply cryptocurrency; it’s also important to mention that not all cryptocurrencies have a limited supply. Ethereum, for example, is the second most prominent blockchain ecosystem, and there’s no cap on its currency.
Ethereum developers still maintain a satisfactory supply/demand ratio through coin burns. Bitcoin, on the other hand, doesn’t have to destroy its coins to prevent inflation – halving does just that. It reduces the rate at which new coins are introduced to the market and keeps the supply of newly mined coins in check.
What Is Bitcoin Mining?
Before we explain what halving is and how it works, let’s refresh our memory on the mining basics.
Bitcoin mining is the process of verifying and recording transactions on the Bitcoin blockchain, which creates new coins. Miners must solve exceptionally intricate math problems to complete this process, and in return, they earn rewards in the form of freshly minted BTC.
Miners are people who utilize their computer power to validate BTC, so the more powerful your device is, the more chances you have to earn the reward. Miners compete to solve hash puzzles and usually join forces to improve their chances of acquiring that digital gold.
Photo illustration: Freepik
Speaking of the miner’s emoluments, the first computer to verify a block of transactions earns 6.25 BTC. As of writing, 6.25 BTC equals around $163,069 ($26,091.10 per coin), making 6.25 BTC an enticing incentive for miners to pour all their CPU power into mining.
Not for long, though.
What Is Bitcoin Halving?
Bitcoin halving is the process of cutting the reward for mining in half. Bitcoin halving is a quadrennial event, as that’s how long it usually takes to meet the conditions for halving. The Bitcoin protocol automatically cuts the miner’s rewards in half every 21,000 blocks, so we don’t really have the exact date of the next Bitcoin halving – but we do have estimates.
When Bitcoin came to life, the mining reward was 50 BTC per block. The first Bitcoin halving occurred was in November 2012, slashing the miners’ rewards to 25 BTC per block. The next reduction of BTC rewards happened in 2016, followed by another slashing in 2020.
Keep in mind that 1 BTC amounted to $12.3 when the first Bitcoin halving occurred and $680 and $8,590 on the last two halving dates. The final halving will likely happen in 2140, and by that time, all BTCs will be minted.
As the current reward for mining amounts to 6.25 BTC, the next halving will reduce the compensation to 3.125 BTC per each minted block. According to predictions, this will happen around April 2024.
The reward system will continue to exist until the very last BTC is minted, but the closer we are to Bitcoin’s final mint, the lesser the opportunity for the miners to make good bucks with mining. Once all 21 million BTCs are in circulation, miners will likely profit primarily from transaction fees.
