Will The Bitcoin Survive?

Will The Bitcoin Survive?

Bitcoin has a lot of similarity with gold because like gold, it cannot be created at random. Just like you have to mine gold you need to “mine” the Bitcoin too, except that here mining refers to a digital process. Bitcoins have a finite supply; this means that there is a limit beyond which Bitcoins cannot be minded. So, does that mean the Bitcoin will disappear eventually?

There can be only 21 million Bitcoins and this means that the supply is going to be tapped out once miners have successfully mined this number. The only possibility of this not happening is if Bitcoin protocols go through a change in the coming years. Bitcoin advocates argue that this finite supply ensures that banks cannot issue fiduciary media arbitrarily. As of now almost 18 million Bitcoins have been already mined and about 3 million are left.

The first 18 million Bitcoins had been mined within 10 years of the Bitcoin launch and since only 3 million are left to be mined, you may think that the days of Bitcoin are going to get over soon enough. However, this assumption is not entirely true. The mining process will reward Bitcoin miners with these coins when a block is successfully verified by them. At the time of Bitcoin launch this reward used to be 50 BTC but this reduced to 25 BTC in four year’s time. In 2016 again, the value reduced to 12.5 BTC. In May 2020, the Bitcoin is expected to undergo another “halving” after which the value will come down to 6.25 BTC. So, rewards for miners will continue to get small and the final Bitcoin is expected to be mined around 2140.

This limit is going to affect Bitcoin miners most. Critics feel that without an incentive to mine, miners are not going to feel motivated to support the Bitcoin network. This is likely to be harmful for Bitcoin’s survival in the long run. Mining is not only needed for issuing new tokens; it is important as it verifies transactions and has justified the blockchain which can be maintained without a bank or financial institution. In case miners stop mining, this network will either collapse or come under a centralized authority.

But what will happen in and around 2140 is hard to predict now. It is possible that the network will change dramatically by that time. Given Bitcoin’s history that is interspersed with new protocols, hard forks, and new trading methods like Bitcoin profit, there may be many factors that influence the process. According to Garrick Hileman of LSE, the Bitcoin may be only a decade old but it has successfully drawn millions of users over the years. There will continue to be many factors driving the future growth of cryptocurrencies like the Bitcoin. James Grimmelman, Professor at Cornell Tech, suggests that Bitcoins will go through forks and fragmentation; these will surface because of technical differences, political controversies and accusations of secret identities and secret mining cartels. These will also be influenced by regulatory pressures being exerted by different national governments. Linda Schilling, Professor of Financial Economics, believes that Bitcoin will have to face competition from both cryptocurrencies and national currencies and it must offer an edge over these or come up with something that makes it exceptional. So, Bitcoin’s survival will depend largely on how people value their privacy, since Bitcoin can guarantee anonymous payment on a wide scale in the most economical way.

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