What Happens to BITCOIN after ALL 21 MILLION are MINED?

what happens to bitcoin when all 21 million bitcoin are mined now today's video is a bit of a sudoku puzzle on steroids and far from talking about the origins of bitcoin about satoshi nakamoto and the mrs surrounding the creator of bitcoin and by the way i think it's crazy that in this day and age we still don't quite know how it all started i want to talk about few rules that kind of govern the universe around bitcoin and if you are interested in bitcoin if you are investing or have invested in bitcoin this is stuff you really need to know and understand so the three things i want to talk about is number one what is this hard cap of 21 million bitcoin circulation and what is the halving process number two how do miners people that mine for bitcoin make money and what's going to happen to them as we approach this cap of 21 million bitcoin circulation and number three what does that mean for the price of bitcoin what does it mean for the future as the rewards for mining get smaller and smaller all right let's talk about it [Music] all right let's define a couple of terms that are really central to how bitcoin is created and how bitcoin exists one is the hard cap and the other one is the halving process so what is the hard cap when satoshi nakamoto created bitcoin a strict limit on how many bitcoin can exist was put in place and that's 21 million bitcoin so this is known as the hard cap it's encoded in the source code of bitcoin and enforced by the nodes on the network and so this hard cap is really central to the value proposition of bitcoin as both as money and as investment because just like with gold it's proving to be a successful store of value and it's difficult to increase the supply and thanks to a process called halving it's becoming more difficult every four years to create bitcoin until eventually it will become impossible now let's talk about the halving process because this is really where it gets very interesting and on the face of it it's a little bit complex but then actually super simple and amazing when you think about how these rules all tie in together and how bitcoin is created uh and then how the system kind of works around it so when you mine for bitcoin all you really do is you run computer systems that are solving cryptographic puzzles equations to find the right solution and when you achieve that when you solve that puzzle you are effectively creating a new blog that's added to the blockchain for bitcoin and so for the creation of each new block you get rewarded by the network in the form of bitcoin you get paid you receive bitcoin and in the beginning when the system started in 2009 you were receiving 50 bitcoin as a reward for creating a new block now satoshi nakamoto encoded this uh halving mechanism in it to ensure that ultimately we stopped producing bitcoin so every and this happens roughly every four years so every time we create 210 000 new blogs in the system every time 210 000 new blogs are created which happens roughly every four years the reward that you are receiving which initially was at 50 bitcoin is divided by two it's halved and so when you look at the history uh since uh uh the beginning of the process from 2009 to 2013 the reward for creating a new block was 50 bitcoin then until 2016 it was 25 it was half that then until 2020 it was uh 12 and a half and then it was halved again and now for the last year and a bit it's uh 6.25 and so 6.25 bitcoin at current prices is about 300 000 that miners get as a reward for creating a new block for the blockchain now let's talk about the second point how are miners getting paid and what's going to happen to that income when all the bitcoin is mined so currently as you know as we just talked about through the halving process they are getting miners are getting paid through these rewards for creating new blocks and that's about 900 bitcoin every single day 900 bitcoin is minted every single day through these blogs that are added to the blockchain so that's about 40 million dollars that globally is kind of being created uh in in bitcoin and aside from that we have transaction fees that think about all the transactions that are happening in bitcoin they are happening on the system they have to be verified so miners that verify these transactions uh as they create the blocks they are also getting paid in transaction fees and that's about 60 to 100 bitcoin every single day so that's about four million dollars so think about it about 40 million dollars in bitcoin is being minted every single day that's new bitcoin added to the system and about uh 60 to 100 bitcoin so about four million dollars is those transaction fees and so over time as the system is being more widely adopted as there's more transactions are happening on the system and at the same time the rewards that miners are getting for adding these new blocks are being halved and halved and halved and these are going to become smaller and smaller and smaller but the transaction fees will keep growing and growing growing until ultimately eventually 100 of the of the rewards that miners are getting will be in the form of transaction fees now let's finally talk about the most interesting point here the one that really concerns us that we are interested in and that's the effect of all these rules that are in place uh around bitcoin how bitcoin is created on the actual price of bitcoin does the price go higher or lower does it matter all these rules that are in place around it and so there are a few points that i want to talk about one is this whole existence of the hard cap the hard cap of 21 million bitcoin in circulation the upper limit has been discussed you know can we change this can we make it a little bit higher because if you are a miner this is a source of income you're mining bitcoin you're you're spending money setting up these networks and every four years we are effectively halving the rewards you're getting even though the price of bitcoin is higher and you're effectively still making more money ultimately this will disappear and so the argument is that this is nothing else than a software you could totally change the code behind it and have more bitcoin in circulation but that argument so far really hasn't gotten any traction for a couple of reasons one is that you would completely kill the whole scarcity element the proposal the core element behind bitcoin's existence is and that's why it's a store of value at this point that there is a limited supply right so the whole scarcity uh point is is super valid for a lot of people and if you suddenly increase this limit from 21 million to a higher number or completely removed it then the price of bitcoin will completely plummet and the other one is the governance how bitcoin is actually governed and set up because you have this is a completely decentralized system that any changes would have to be verified by every single node on the network so this is also a problem that really hasn't gotten any traction and so far this hard cap of 21 million bitcoin is still firmly in place now the second point that is influencing the price potentially is the halving system that happens about every four years and so every time you have the rewards that miners are uh receiving they are effectively selling less bitcoin into the market and if you keep the demand constant then just the laws of supply and demand govern that the price of bitcoin should go higher and in fact the whole debate about the fact that miners keep receiving only half of the rewards so they keep receiving less money uh so far has been outweighed by the fact that the price of bitcoin has grown exponentially higher much more than the 50 decline in the rewards they are getting and so far it's absolutely worth it for the miners to keep mining uh but ultimately this whole debate around the halving and the effect on prices is definitely up there and finally the last element here what if all miners stopped mining today well if everybody stopped mining we would still be able to see all the previous transactions on the network but suddenly you wouldn't be able to confirm any new transactions because confirming new transactions requires mining so you wouldn't be able effectively to spend any bitcoin and so eventually the debate is you know when the rewards are being halved and halved and halved eventually become too small are the transaction fees going to compensate miners enough and incentivize them to still be part of the system keep mining and keep confirming the transactions and is the system going to be adopted wildly enough for these transaction fees to be high enough for the miners to still be interested because unlike any other system when you think about electronic trading or or just transaction fees for anything in your life they over time they go lower right because systems improve because technology improves transaction fees usually go down not up but here the expectation is that ultimately transaction fees will be the only source of income for miners and that they will be growing because of the wider adoption of the network uh by more and more users and by the limited amount of transactions you can confirm in each block that is being added to the blockchain so anyway a little bit more of a complex discussion around uh bitcoin today uh i think this is super interesting in terms of you know how did somebody come up with this 10 15 years ago and and put this together and this is obviously working and people are interested in it they are adopting bitcoin you can now go buy a car spend bitcoin uh for season tickets uh for football or ice hockey or or whatever i just think this is super interesting and um even though you may not be investing in bitcoin even though you may think that this is just a bubble like john paulson by the way uh he just put it out in his interview this week uh certainly this is something we should all know about uh because it's being like i said much more widely adopted around us uh and it's gonna be part of our future anyway thanks for hanging out today i appreciate it uh please give a like to the video uh it's gonna help that magical algorithm here on youtube uh subscribe to the channel if you haven't yet and i'll see you in the next video

Channel: Martin Zeman

Views: 3,288

Keywords: bitcoin, bitcoin mining, halving process, bitcoin halving explained, bitcoin mining explained, bitcoin hard cap explained, bitcoin 21 million limit, does bitcoin have a limit?, how is bitcoin mined, how much bitcoin can you mine, bitcoin blockchain explained, changing bitcoin hard cap, bitcoin scarcity, bitcoin governance, confirming bitcoin transactions, how to mine more bitcoin, how to add blocks to blockchain, bitcoin vs ethereum, bitcoin mining limit, how bitcoin works

Id: xBEVQ8gW6qQ

Length: 10min 5sec (605 seconds)

Published: Fri Sep 03 2021