Bitcoin is like gold in many ways. Like gold, Bitcoin cannot simply be created arbitrarily. Gold must be mined out of the ground, and Bitcoin must be mined via digital means. Linked with this process is the stipulation set forth by the founders of Bitcoin that, like gold, it have a limited and finite supply. In fact, there are only 21 million Bitcoins that can be mined in total. Once miners have unlocked this many Bitcoins, the planet's supply will essentially be tapped out, unless Bitcoin's protocol is changed to allow for a larger supply. All confirmed Bitcoin transactions are recorded in the blockchain. The blockchain is described as a shared public ledger on which the entire Bitcoin network relies.

Bitcoin wallets calculate their spendable balance so that new transactions can be verified thereby ensuring they're actually owned by the spender.

Supporters of Bitcoin say that, like gold, the fixed supply of the currency means that banks are kept in check and not allowed to arbitrarily issue fiduciary media. What will happen when the global supply of Bitcoin reaches its limit? This is the subject of much debate among the followers and aficionados of all things cryptocurrency.

Effects of Finite Bitcoin Supply on Bitcoin Miners

It may seem that the group of individuals most directly affected by the limit of the Bitcoin supply will be the Bitcoin miners themselves. On one hand, there are detractors of the Bitcoin limitation who that say that miners will be forced away from the block rewards they receive for their work once the Bitcoin supply has reached 21 million in circulation. In this case, these miners may need to rely on transaction fees in order to maintain operations. Bitcoin.com points to an argument that miners will then find the process unaffordable, leading to a reduction in the number of miners, a centralization process of the Bitcoin network, and numerous negative effects on the Bitcoin system.

Key Takeaways

  • There are only 21 million Bitcoins that can be mined in total.
  • Once Bitcoin miners have unlocked all the Bitcoins, the planet's supply will essentially be tapped out, unless Bitcoin's protocol is changed to allow for a larger supply.
  • Supporters of Bitcoin say that, like gold, the fixed supply of the currency means that banks are kept in check and not allowed to arbitrarily issue fiduciary media.

Price of Bitcoin

While no one is entirely sure how Bitcoin will continue to spread to the larger financial world, it seems likely that a limited supply of the currency may cause prices to continue to increase. There are also stockpiles of inactive coins that are held around the world, the largest supply of which belongs to the person or group who founded Bitcoin, Satoshi Nakamoto. Perhaps this supply, consisting of roughly one million Bitcoins, is intentionally being saved for a time when the global supply is facing increased levels of demand.