The bitcoin is not infinite, there can not be more than 21 million
One of the most curious properties of Bitcoin is that the maximum number of coins that can be created is defined: 21 million Bitcoin. This is because the creator or original creators of Bitcoin (under the pseudonym of Satoshi Nakamoto) decided to create a deflationary currency, like gold.
If something is scarce naturally it is more likely to have value. If Bitcoin could be created indefinitely and uncontrolled, it would have no value (or it would be very temporary). If its creation is limited, it increases the probability that it is good, being scarce, it will have value.
Now, what will happen when the limit of 21 million Bitcoin is reached? It is a big question whose answer will depend, in part, on the acceptance that the cryptocurrency has at that moment.
When will the limit be reached?
First of all you have to know how much is missing to reach the limit of 21 million Bitcoin. And the answer is "it depends". And this is because the bitcoin creation algorithm is somewhat complicated and the rate of generation of new Bitcoin in the mining process is becoming slower as time passes.
Currently some 16 million Bitcoin have been mined, which is 75% of the final value. It is estimated that by 2032, 99% of Bitcoin will have been mined, but since the production rate will be lower it will not be until approximately 2140 when the last Bitcoin is mined.
However in practice somewhere between 2032 and 2140 the profitability of mining will be very low if we look at it from the point of view of Bitcoin that appear out of nowhere to reward the miner. Therefore, we will be in a situation where we could say that the limit has been reached, although there will still be an incidental prize.
What will happen to the miners?
The big question is what will happen to the miners if they do not receive compensation for their work. And we must not forget that without miners the transactions are not confirmed and the entire system behind Bitcoin (the blockchain) collapses.
When the reward for mining goes down even more what will happen is that the miners will live on the commissions to confirm the transactions. And is that in every transaction that occurs from Bitcoin, a small part of the money is lost to finance the miners. At present this is negligible with respect to what is obtained by mining, but in the future it will be the main source of income.
So that the miners do not disappear, two things must happen: either that the commissions are higher or that only the most efficient miners survive. This we have seen in the past, the miners who used CPUs gave way to those of GPU and those who do the mining by ASIC. In the future only the most efficient will survive. And if it is not enough, if the cost of energy is excessive, if the price of Bitcoin is low, they may disappear and with them the virtual currency.
Will there be a fork?
Another possibility is that there is a fork of Bitcoin that is adopted in mass precisely to raise that limit of 21 million Bitcoin. However, it is difficult to see something like that, as it would be an attack on the value that the miners treasure. One of the reasons why Bitcoin has risen so much is because of its scarcity, and therefore we can assume that a fork will not happen because it does not interest the miners.
It is true that there are other cryptocurrencies that have no limit and a constant rhythm of creation over time. This has its advantage: in the real economy we are used to having some inflation. And deflationary currencies create very serious problems in the economy.
This is why Bitcoin is more like an asset to accumulate value (like gold) than a means of payment like a currency. And as we have seen, the limited number could also jeopardize its continuity when there are not as many incentives to continue mining.
Will all Bitcoin be lost?
Another problem that Bitcoin have, due to its shortage, is that they end up losing everyone. On the one hand there are people who, due to computer problems, have lost their local wallets; On the other hand there are false addresses (for example "1BitcoinEaterAddressDontSendf59kuE") that are valid but whose private key is almost impossible to find out.
These two processes will make every time there is less Bitcoin, although surely it is a slow process (the more value the Bitcoin has, the less careless its owners will be). This will make the Bitcoin that continue to circulate have more value but it is also a problem for the viability of the currency as a means of payment. Of course a deflationary currency is not the best currency and this type of "hard" shortage, with an unbreakable limit, does not help.
And the fractional reserve?
It is true that there is a way to create coins from nothing even if there is a physical limit to the number of Bitcoin that may exist: the fractional reserve. In the real economy banks create money without printing money. The method is by lending the deposited money.
A person deposits their money in the bank, and instead of saving it, the bank uses it to lend it to users who ask for a loan. Therefore the money deposited multiplies. There is a limit, banks can not use all the money deposited. And for that reservation that has to stay in banks, the method of creating money is called "fractional reserve."
Something similar could happen with Bitcoin. If financial entities that saved the Bitcoin appeared, these could be multiplied by the fractional reserve. The certain thing is the design of Bitcoin is thought for there are individual accounts and can operate without need of banks, but the existence of Coinbase and other exchange that keeps the Bitcoin open the possibility to operate as banks and instead of simply guarding the values can operate with them.
If a Bitcoin-based banking system arises and with fractional reserve rules similar to those of traditional banking, we would be faced with a bitcoin multiplying factor that would make the 21 million limit a simple technical fact without many consequences. have been mentioned previously.
So what will happen when the limit of 21 million is reached?
It is difficult to know what will happen. If the miners are not sufficiently rewarded, as some think, the network will fall. If they continue to work, as others think, there will be less and less Bitcoin in circulation, which will make it work as a reserve asset, but it would not be very convenient as a means of payment. But if there is a fork or if there are Bitcoin banks that use the fractional reserve, both very remote possibilities, it may end up being used as currency.
Everything is in the air. Of course it could always happen that you do not reach the 21 million Bitcoin, that all this that we are living is a bubbly and crumble before reaching that moment.
