Are bitcoins easy to mine?
Bitcoin is at par with the market’s leading commodity- Gold due to its high value in the financial market. It is often termed “Digital gold.” Like gold mining happens from the earth’s surface, bitcoins, with the help of computers.
Bitcoin is the most dominant crypto-currency since its start in 2009. It has existed for more than a decade now, with many individuals and high-tech companies trying to hold on to bitcoins to achieve innovative features that they can use in their daily lives.
Satoshi Nakamoto is to be the pseudonymous character who discovered bitcoins. While miners need to break down hard rocks to extract valuable metals like Gold, tech miners who want to mine bitcoins have to crack various complicated mathematical equations to get rewards in bitcoins. They hide deep inside data blocks and find it only with a pseudonymous creator’s unique algorithm.
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How many bitcoins can be mined?
There is a total no of 21 million bitcoins in the world of data and technology. But why only a limited number of 21 million and not more? It is a common question in people’s minds.
When Satoshi Nakamoto invented bitcoins, it is a fact that the global supply of M1 money stood at 21 trillion dollars. Each dollar is equal to this. Therefore the total money count stood at 2,100 trillion.
Similarly, ascents are the smallest denomination of a dollar, and SatoshiSatoshi is the smallest denomination of a bitcoin. A bitcoin holds around 100 satoshis, which means that the total number of bitcoins would be 2,100 trillion. The creator, Satoshi, explained that he wanted the bitcoins to maintain the same value as traditional fiat currencies. It means that 0.001 bitcoin would be worth one euro. The current value of bitcoins stands at 8,600 US dollars with a market capitalization of around 158 billion US dollars.
The creator said that he wanted to create something that would make prices similar to the currencies existing. It is due to the future’s unpredictability that he invented something between both the margins.
He further asserted that if bitcoins remained a small niche, their worth would be less per unit of the existing currencies. To increase its value in the financial market, the amount produced is less, which stands at 21 billion. Moreover, it makes up only a small fraction of world commerce.
There are other theories as well to justify this aspect. Many say that Nakamoto had arbitrarily limited the number to 21 billion to add blocks to the existing blockchain. Another theory states that he did it to attract tech-savvies into it, with bitcoin’s reward getting to half every 210,000 blocks.
The block mining reward will hit a 0 when all 21 million bitcoins are over with extraction. Currently, around 18.5 billion bitcoins are already extracted. That leaves you with another 2.5 million bitcoins only!
Rewards for bitcoin mining in upcoming years
The reward for the miners in the initial stages was 50 bitcoins per block they mined. It reduced to 25 bitcoins in the year 2012. It saw a further reduction to 12.5 bitcoins per block mined in 2016, till it reached 6.25 bitcoins on 11 May 2020- as the current data states. This series of cuts reduce the inflation rate of bitcoins to half after four years.
The reward will continue reducing to half until and unless all the bitcoins are over. This reduction is to control the circulation of newer tokens.
Analysts believe that the final bitcoin extraction can happen in and around the year 2140, and not before that. But, speculations of the number being flexible is also hovering around the air of world commerce. Thus, there are chances that the number of bitcoins can see an increase in looking at the demand.
Let us say that the number of bitcoins has perished. What do you think are the impacts it would have on the world market of commerce?
It can indeed be a sensational event in the history of world commerce. It would add to the thrill in the commercial market capital and the affectionate people associated with it in the crypto sphere.
Once the miners have extracted all the bitcoins, there would be no more left for mining, provided the protocols related to the bitcoin extraction see an alteration in its policies.
With the supplies nearing exhaustion, let us discover the implications of whether the bitcoins are over for mining and usage.
1. The people who face the worst consequence- the miners!
The process involving bitcoin mining allows the miners to get rewards for every block they discover in the network. The tips they receive are of two types:
a. They receive a portion of the BTC for every block they recover; and
b. They get incentives from the fees charged for transactions. It is majorly for their efforts to identify and process each transaction.
After all, verifying also requires some hard work. So the miners deserve to get paid.
The higher the fees, the higher the incentives miners get. It also provides them with an impetus to prioritize a transaction in the network. The speed of the execution of trade depends invariably on the incentives you pay. More the motivation, the higher the rate!
When all the bitcoins are discovered, the miners will lose out on their rewards for the blocks they find out. They will only earn the fees for conducting every successful transaction and no more tips for the blocks.
The miners will continue competitively to participate in actively validate new transactions because of continued payment. But it is hard to tell whether that amount would be sufficient to provide themselves with resources.
But to keep in mind, this fee that is around hundreds of dollars per block will later increase to be thousands of dollars per block. The growing number of transactions on the blockchain and the rising prices of bitcoins will make this happen. Ultimately this will behave like a closed economy where transaction fees are on the same pedestal as taxes.
2. The whole network of bitcoin miners is grossly affected
An increase in the prices of bitcoins also increases the fees charged by the miners for transactions. However, ignoring the unpredictability of the future is foolish! No one knows how long the bitcoin mining cost will remain high, and even the end of bitcoin technology is uncertain.
If the mining process gets more comfortable and cheaper, it can give birth to new businesses. It is already known that the process of bitcoin extraction is one of high energy consumption and harms the environment.
Therefore, if bitcoin mining efficiency increases significantly, then the bitcoin miners would try to hold their ground and secure their business network.
3. Market prices and investments would go for a ride
We are already aware of the fact that bitcoins are scarce in the commercial market. The real truth that the number of bitcoins available is less makes it reasonable to increase their market prices.
As bitcoins are a highly volatile asset, this news is one of ecstasy for aspiring investors. With extreme price gains and drastic fall in its availability, the investors would get into the market and try to gather as many returns as possible.
The fact that analysts say that bitcoins will not perish before the year 2140 gives another 100 years in hand. By that time, generations of bitcoin miners will have already enjoyed their resources earned and would find their business booming quite well.
As the rewards earned can decrease over time, the miners can be very speculative with their mining process before the deadline arrives.
It is more important to realize that bitcoins’ networking is likely to change with time. New protocols, new processes of transactions, and new factors will fill into the air space of bitcoin processing as time progresses.
By now, we all must have understood how complicated the arena of bitcoins is. There are a lot of intrinsic issues that guide its working daily. As it is highly profitable for investors, the popularity of bitcoins has increased at an alarming speed. It is perhaps the call of the day and is almost at par with the various currencies. It has gifted the miners with lavish lives to live and gather sufficient resources for the future.
However, to clarify whether it is possible to own a whole bitcoin, it doesn’t seem easy. With rising prices and increasing scarcity, it isn’t easy to get hold of an entire bitcoin. But do not lose hope!
We hope that with this article, we could break down the analogy of bitcoin processing. You will understand it well if you read this piece with attention. We hope that after discovering this article, you will understand the intricacies related to it.
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