Following the latest Bitcoin halving that took place in May 2020, where block rewards for miners were halved from 12.5BTC to 6.25BTC thereby halving miners' rewards for every block creation, bitcoin was created with a maximum supply of 21million and so far 18.5million has been successfully mined within a period of 11years and only 3million are left to be mined.

Assuming that there are no changes to the protocol, and miners' rewards halved whenever they have successfully mine 210,000 blocks which take about 4yrs to achieve, the total supply of bitcoin will be mined by 2140, 120 years from now.
Considering the time it has taken to mine more than 80% of bitcoins max supply, this could happen sooner than we think, so if the lasts of the total supply are mined today what happens? what will be the fate of the bitcoin protocol?.

We will discuss these points in this article.....

What happens when the rewards for block creation are no longer substantial to guarantee the network's security.
Bitcoin miners are currently enjoying a time of massive liquidity and rewards for validating blocks on the blockchain, even though with the halving of bitcoin from 12.5BTC per block created to 6.25BTC miners are well in their comfort zone.

Currently, more than 18million bitcoin tokens have been created over the course of the last 11years, this circulating supply is currently over 80% of the total supply and mining would get more difficult as more miners enter the network and the 50% slash of miners rewards only maks the job tougher.

Graph describing the circulating supply if bitcoin

In a couple of decades, the bitcoin network will be faced with a very important issue, the miner's rewards will have been reduced to less than 1BTC for validating a block and confirming transactions in the bitcoin network. This is because mining bitcoin is super expensive, this is mainly due to the complex computing power(these supercomputers are used to solve cryptographic puzzles in the bitcoin network for validating blocks and confirming transactions) involved and electricity consumption that is required to keep these computers working 24/7. So the costs of mining should be well above the rewards received by miners and this is a major concern cause the security of the network will be in jeopardy, if this doesn't happen miners may not be driven to continue to support the network.

But, when the day comes that the 21million cap is hit, there will be no more BTC rewards for miners. However, transactions still need to be validated and stored on blocks in the blockchain - so miners will only benefit from Transaction fees. This was laid out specifically in the bitcoin whitepaper and I quote

“In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes. I’m sure that in 20 years there will either be very large transaction volume or no volume,”-Nakamoto

“Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.”-Nakamoto

As it stands, Bitcoin transactions are processed by the network in order of the transaction fee associated with that specific transaction. The higher the fee, the more incentive there is for a miner to prioritize your transaction to be included in a block. However generally these fees that represent a few hundred dollars per block could rise parabolically to thousands of dollars per block. This rise will be mainly due to increased transaction volume and also a parabolic increase in the price of bitcoin. Ultimately, the bitcoin network could function like a closed economy, where transaction fees are assessed much like taxes.

Another scenario is in the cards where mining technology could undergo immense changes and bring about a mining process where mining hardware become so energy efficient and less expensive and could be installed in a mobile device like mobile phone and portable computers. This development would turn mining from a purposeful business decision to an afterthought, surviving in the background of daily life. If these changes in mining costs are achieved in the next century we could see a future where transaction fees prove to be plenty to keep miners in business.

What could happen in between?
I believe we could see a lot of significant changes in the mining process way before the last of the coin are minted because the reward pool for miners will eventually become obsolete amounting to just mere fragments and worth merely a few hundred dollars.

Considering the level of changes and improvements we have seen over the last decade like hard forks, new protocols, new methods of recording, and processing transactions. We could see a consensus that assures miners' incentive and keep the network safe and decentralized. We have seen changes like the:

• Segwit protocol- Segregated Witness or SegWit is a soft work protocol that changes the method of storing data. It was presented in December 2015 by Pieter Wiulle as a solution to Bitcoin’s scalability problems.

• Lightning Network -The Lightning Network is a payment protocol that works as a second layer on top of a blockchain. This protocol was also presented to help solve Bitcoins scalability issue. The lightning network is currently in the early stages and still undergoing improvements although it's available for live tests.

So I personally believe we could see a protocol that changes the rewards scheme and make mining more profitable for miners.

Conclusion

I personally believe that things won't be the same with the bitcoin network after its final coins are mined and miners will have to run the network on a few hundred dollars or block, I believe we could see massive changes in the future.

How about you Do you think Bitcoin mining will remain profitable after the block reward goes away?

This post was made in response to #steemcryptochallenge, Week-5- I Love Bitcoin.

It's been an eventful few weeks on the #steemcryptochallenge and a lot of great entries and new information I have never seen before, it has been a very entertaining, educative, and adventurous time here, I am very happy and could love it if we see a part 2 of this challenge. Special thanks to the steemit team.
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