The process of generating new Bitcoin is known as mining. This involves adding new blocks to the Bitcoin blockchain to ensure network security. Miners then receive Bitcoin as a reward.
However, Bitcoin’s supply is limited to 21 million coins. Thus, potential investors begin to wonder what will happen when the network stops producing new coins. If the subsidy for adding new blocks runs out, will miners still be incentivized to secure the system?
Billy Boone, director of market research at Simple Mining, provides us with an answer. In short, yes, miners will still have an incentive to secure the Bitcoin network. In fact, their role will matter more than ever.
“A lot of people think that the block reward is just the block subsidy, but the block reward is the block subsidy plus the transaction fees,” Boone told The Street.
This difference becomes increasingly important over time. The subsidy, or Bitcoin reward for adding new blocks, is designed to decrease over time due to an event called halving.
In fact, the block reward will reach zero around the year 2140. At this point, miners will not receive new Bitcoins for adding blocks to the network.
However, this does not mean that miners will receive no rewards at all. They will still receive transaction fees from every transaction that occurs in a block. Unfortunately, Boone argues that this feature is still underappreciated by the public.
Most investors focus on Bitcoin's supply cap, but few consider the scarcity of the infrastructure where Bitcoin transactions take place.
The Bitcoin blockchain has limited capacity. One block can only hold a few thousand transactions.
Boone illustrates this constraint. “If all eight billion people in the world wanted to send a Bitcoin transaction, it would take like sixty years,”
Bitcoin miners are the producers of this infrastructure. They choose which transactions to include in each block. Their role is similar to traditional payment processors, such as Visa and Mastercard, which charge a small fee for each transaction. The difference is that miners are not controlled by a single centralized authority.
Boone believes this dynamic will shape a new mining economy long before mining subsidies disappear entirely. As Bitcoin grows, new blocks will become increasingly valuable. Transaction fees will be the driver of miners' income.
Mining will not disappear. Miners will continue to have incentives in the form of transaction fees. Interested in becoming a miner? Learn how to mine in the article What is Crypto Mining and How to Start: A Complete Guide.
