Will BITCOIN Collapse At The 21 Million Limit?? 😰

there is a reason why bitcoin is often referred to as digital gold this is because like gold bitcoin has a maximum supply and while gold has utility in electronics and medicine bitcoin has utility as a network that allows you to safely transfer and store value without a middleman this combination of scarcity and utility is what gives gold and bitcoin their incredible value however there's one big difference between gold and bitcoin and this is that bitcoin relies on the creation of new bitcoin to reward miners to process transactions on the network when all the gold gets mined it will still be possible to exchange it but what happens when all the bitcoin is mined will the bitcoin network grind to a halt and bring the entire cryptocurrency space crashing down with it how long do we have before this happens is there a solution to this problem well never fear because today i will answer all these questions and more [Music] before we binge on bitcoin there's something you need to know i am not a financial advisor and i do not plan on becoming one anytime soon either even when that day comes you'll be the first to know until that time everything you hear and see in these videos is not financial or investment advice and is purely for educational purposes it's on you to make your own investment decisions and i hope my content will help you build up the knowledge you need to make the right calls now if you're new here i would like to welcome you to the coin bureau my name is guy and this channel is where i put my cryptocurrency addiction on full display coins tokens news reviews and useful guides are just a few of the crypto topics i cover on a daily basis if this sounds like what you've been looking for then join me in my quest for crypto knowledge by subscribing to the channel remember to ping that notification bell since i won't always show up on your youtube home page if you want to get a sense of what you're in for today well take a peek at those time stamps i've left down below if you see a topic that you just can't wait to hear about well feel free to skip along to it so without further ado let's see what the future has in store for the bitcoin network now i know most of you are quite familiar with bitcoin but i need to make sure we're all on the same page for this video so as such i'm going to start with a quick refresher on some of the relevant points the first bitcoin block was mined on the 3rd of january 2009 presumably by bitcoin's creator satoshi nakamoto bitcoin's genesis block contained a hidden message which read quote the times 3rd of january 2009 chancellor on brink of second bailout for banks which if you couldn't tell was the headline in the london times newspaper on that day in addition to this message bitcoin's first block contained the first ever cryptocurrency mining reward of 50 btc the rationale behind having btc coins at all is that they serve as an economic incentive for miners to maintain the network btc is given as a reward for processing transactions which are written to blocks on the bitcoin blockchain new btc are issued every time a new bitcoin block is mined the bitcoin code ensures that this happens roughly every 10 minutes by adjusting the mining difficulty depending on how many miners there are the bitcoin block reward was 50 btc until november 28 2012 when bitcoin underwent its first halving reducing the block reward from 50 btc to 25 btc a bitcoin halving happens every 210 000 blocks now although this technically works out to four years the actual figure is a bit different as i'll explain in a moment the bitcoin halvings are significant because the sudden reduction in new btc supply they cause is thought to eventually cause a spike in the price of btc assuming demand for btc stays the same or increases after the halving case in point the most recent bitcoin halving happened in may of 2020 and it's quite clear that we're now in a bull market anyways these bitcoin halvings aren't going to keep happening forever that's because the maximum amount of btc that can ever be mined is 21 million and this limit is built into bitcoin's code it is likely that satoshi nakamoto chose this limit for mathematical reasons that are too complicated to explain here that said it is also possible that he chose this limit based on the world's m1 money supply which was around 21 trillion dollars in 2009. if this is the case then it means satoshi intended each btc to eventually be worth one million dollars now if you have no idea what this m1 stuff is i recommend you watch my recent video about the greatest ponzi scheme in history by opening up a new tab using a link up there on the top right so when will the last btc be mined well if you've googled this question before you probably got the same answer i did which was the year 2140. now if you think that seems a long time given the current circulating supply of btc is around 18.6 million you would be correct when you dig deeper into the calculation used by most articles to come to this figure you'll notice it assumes that bitcoin undergoes a halving every four years which is not entirely correct take a look at the dates for the last three bitcoin halvings do you notice anything that's right they're not exactly four years apart in fact they're only about three years and nine months apart thankfully someone else did the maths on this so i don't have to and they found out that if you assume this three year and nine month gap continues the last btc will probably be mined at the end of 2078. when there's no more btc to mine there will be no more economic incentives for miners and the bitcoin network will die and since the entire cryptocurrency market is dependent on bitcoin every cryptocurrency will go to zero said no one ever first off bitcoin dominance has been dropping like a rock since 2017 which suggests that btc will not be the largest cryptocurrency by market cap in 2078 meaning the rest of the crypto market will not be as dependent on it anymore also besides what the btc miners get from each new bitcoin block they also earn fees as compensation for processing transactions if you pop open a bitcoin block explorer you can actually see the amount of fees in btc a miner earned from the block that they mined by subtracting the current btc rewards from the total block reward in this case we can see that miners are earning anywhere between 0.5 to 1 btc per block in transaction fees alone now many people believe that by the time the btc mining rewards run out these transaction fees will be enough to sustain the bitcoin network there's just one problem with this hypothesis given that bitcoin can only process around seven transactions per second it's very unlikely that it's going to become the payment network that is used for microtransactions like buying a pack of gum at a grocery store the transaction fees alone would be multiples of what you were spending bitcoin developers are very much aware of the growing cost of transaction fees and how they disrupt micro payments it's why they've been developing layer 2 scaling solutions like the lightning network for years the problem with layer 2 solutions like the lightning network is that they reduce the number of transactions that actually occur on the bitcoin blockchain instead they only submit transactions to the bitcoin blockchain when a payment channel is opened and when it is closed fewer transactions mean that the fees for opening and closing these payment channels would have to be incredibly high for bitcoin miners to remain profitable and operational after all they have to cover the cost of the hardware and electricity required to maintain the bitcoin network these high fees would then put pressure on layer twos like the lightning network to minimize the opening and closing of their payment channels resulting in a vicious cycle that would either bankrupt bitcoin miners or corrupt the bitcoin network due to excessive reliance on less secure layer 2 solutions now i know bitcoin maximalists will disagree but it seems quite clear that bitcoin's main stick is as a store of value not as a currency network that's used for day-to-day transactions as such it is much more likely that btc will seldom be moved around in the future contrary to what satoshi nakamoto envisioned this means that if bitcoin is going to survive beyond the data that stops rewarding miners with btc it will need to be able to do so without relying on transaction fees here are a few solutions that i see on the horizon as i mentioned a few moments ago sustaining a proof-of-work cryptocurrency network like bitcoin requires a lot of computing power and a lot of electricity these make up the bulk of the operating expenses of cryptocurrency miners around the world and it's why a lot of mining farms flock to countries and regions with cheap energy namely china and parts of north america even though i just mentioned that the bitcoin network is unlikely to survive on transaction fees alone this is based on the assumption that the cost of cryptocurrency mining will be the same when we run out of btc however it is very likely that energy will become cheaper and technology will become more efficient in the coming decades although green energy solutions are still very much in their infancy green energy providers here in the uk are actually using their excess power to mine cryptocurrencies this makes their services even more profitable and allows them to expand their green energy operations much the chagrin of the fudsters who claim that cryptocurrency mining is killing the planet moreover bitcoin mining rigs are becoming more affordable and more efficient by the year cheap energy and efficient hardware would make it easy for bitcoin miners to stay profitable using transaction fees alone and it would even further decentralize bitcoin as new miners join the network to get a share of those fees economic incentives aren't the only thing that could keep the bitcoin network afloat either ever since companies like microstrategy began accumulating bitcoin as part of their treasury reserves many have been speculating when the public sector will follow suit it seems that it's only a matter of time given that the mayor of miami recently considered investing 1 percent of the city's treasury reserves into btc if and when cities states and even governments begin holding btc as part of their reserves they will have all the incentive in the world to make sure the bitcoin network remains secure and operational if public institutions are holding btc after the last one is mined and they find out that bitcoin miners are starting to shut off their mining rigs because they're not making profits i think they would not hesitate to subsidize those miners or even start their own mining operations to sustain the bitcoin network similarly if enough people in a given country hold btc and the bitcoin network is at risk they could pressurize their government to implement subsidies for bitcoin mining farms to protect their wealth these protectionist measures may not come from just the public sector either if enough private companies start to hold large amounts of btc they too would have reason to rush in and make sure the bitcoin network remains operational this skin in the game principle is what motivates people to run bitcoin nodes which store copies of transaction histories on the bitcoin blockchain to support the network's decentralization there are over 6 400 bitcoin nodes even though they do not earn any transaction fees or mining rewards for the valuable service they provide another possibility is that we could simply see the entire bitcoin network migrate to a smart contract blockchain like ethereum no i'm not joking almost seven percent of bitcoin circulating supply is currently on ethereum as an erc20 token as wbtc and renbtc this is thanks to something called wrapping which locks a cryptocurrency on its native blockchain to mint an equivalent amount of erc20 tokens on ethereum if you're unfamiliar with your wrapping then allow me to be your savior hit that link in the top right to watch my video on it the amount of wrapped btc has increased substantially over the past year and this is for two reasons first you can use wrapped btc in various d5 protocols to earn interest on your btc second it's usually faster and cheaper to move wbtc around than actual btc it's not just ethereum either cardano and polkadot are expected to roll out their smart contract functionalities this year and polkadot announced in october 2020 that they will be supporting wrapped btc on their network in q1 of this year as polka btc by the time the btc rewards run out ethereum polkadot and cardano would be insanely decentralized meaning there would be little to no issues as far as network security goes the only challenge would be migrating all the btc on the bitcoin blockchain to ethereum which is likely something that not every btc holder would be willing to do that said it is very doable since btc can be burned on the bitcoin blockchain by sending it to a dummy address now these dummy addresses are the sorts of addresses that you've accidentally transferred funds to when you are still a crypto noob an ethereum smart contract could watch the transactions being sent to these dummy bitcoin addresses and mint an equivalent amount of btc as erc20 tokens there is of course one last solution on the table and that's to increase the supply of btc now i know what you're thinking guy i thought 21 million was a protocol defined limit and yes you are right however it is technically possible to increase this limit so long as there is consensus from the quote economic majority and no that's not just 51 of miners that includes all economic participants i'm talking miners developers users merchants the whole shebang the overwhelming majority of these groups have to be in agreement about any significant change to the bitcoin network for it to pass even though it's ultimately the developers at companies like blockstream that implement the changes to bitcoin's code if you're wondering why consider the following part of the bitcoin community wanted to increase bitcoin's block size to accommodate more transactions not everyone was on board with the idea this resulted in a fork of the bitcoin network in the summer of 2017. the new bitcoin blockchain with the larger block size became known as bitcoin cash now bitcoin cash actually forked again in november 2018 to spawn bitcoin satoshi vision aka bitcoin sv now don't ask me about bitcoin sv because i ain't touching that with a 10-foot pole anyways even though the economic stakeholders in bitcoin's ecosystem that we see today would never designate a bitcoin blockchain with a higher btc supply as the real bitcoin this could potentially change in the coming years and decades it is entirely possible that the maximum supply of btc could someday be increased but that sure as hell ain't happening on my watch as it turns out bitcoin has more than one way of surviving well past the day those btc mining rewards run out now i find it crazy that this will probably happen in my lifetime but i think the advancements we're going to see in the cryptocurrency space between now and then are going to be even crazier after all the crypto space isn't the only place where innovation is happening many of these new inventions are going to be relevant to the bitcoin network and could potentially make it possible to create an entirely new economic model for cryptocurrency mining this is going to be necessary because i really don't see how the bitcoin network could sustain itself on transaction fees alone and i don't think layer 2 solutions help at all with that issue when it comes to payments there is no shortage of competition in the cryptocurrency space and i hate to admit it but many of these competing projects do a much better job than bitcoin i believe in bitcoin as a store of value and i think that public and private institutions are starting to see the light too it would not surprise me in the slightest if we see a major city state or government list btc among its reserve assets by the end of this year even when that news comes out it will be the final confirmation that the bitcoin network is here to stay oddly enough it seems that btc coins are slowly but surely migrating to greener pastures i think it is very likely that the majority of all existing btc will be locked on smart contract blockchains like ethereum polkadot and cardano by the end of the decade at the end of the day everything revolves around economic incentives and i find it logical that people want to move their store of value assets to platforms where they can earn interest now as for increasing the maximum supply of btc that is just completely out of the question for the time being bitcoin is the most secure network in the world it has millions of users millions of miners and tens of thousands of the world's brightest minds working on it day and night no amount of fun can change this fact if it ain't broke don't fix it if you enjoyed this video help others see it by smashing that like button if the subscribe button somehow missed your cursor then head on over and smash it too remember to ping that notification bell so you don't miss a single update now if my daily videos aren't enough to crush your crypto cravings you can scratch that itch by joining the coin bureau insider telegram channel and following me on twitter and instagram if you want something a bit more heavy duty then subscribe to my weekly newsletter where i give you a detailed breakdown of all the latest and greatest crypto tips and treats that will help you stay on top of this bull market if you want to support the channel and look stylish while doing so then the coin bureau merch store is the place to go there are dozens of designs and dozens more in the works so be sure to check them out links to all these goodies are in the description and with that ladies and gents i bid you farewell keep calm and hodl on [Music] you

Channel: Coin Bureau

Views: 692,126

Keywords: Bitcoin, Mining, Blockchain, 21 Million, Cryptocurrency, Security, Network, Decentralisatoin, Crypto, Trading

Id: rnKdpf-P1TI

Length: 19min 17sec (1157 seconds)

Published: Tue Feb 09 2021