Should Beijing look at its crypto ban? A former bank member believes so
A former member of the Monetary Policy Committee at the People’s Bank of China believes the ban on China should be reconsidered.
The total number of Bitcoin in circulation has hit a record as 90% of the total capped supply has been mined.
Eighteen months after the most recent Bitcoin halving, where the reward for Bitcoin mining is halved, the current circulation of Bitcoin hit 18.899 million, marking 90% of the total supply that will ever be available. The data comes from Blockchain.com. As per the graph representing the Bitcoin mined over time, it’s clear that Bitcoin becomes more difficult to mine, meaning the remaining 10% left will take longer.
What exactly is Bitcoin mining?
Bitcoin mining refers to the process of creating new Bitcoin. This happens by miners who use machines to solve extremely complicated algorithmic problems. Each solved problem verifies transactions that occur on the blockchain and works towards creating new blocks. When a Bitcoin has been mined, the miner receives Bitcoin for the work and energy required. This reward is cut in half every 210,000 blocks that are mined (which is roughly every four years). Right now, the reward for mining is 6.25 Bitcoin.
Bitcoin has a hard cap of 21 million coins that will ever be available, unlike fiat currencies which can be printed by reserve banks when more money is needed. The cap was set to ensure that value is held by each coin and that the cryptocurrency will not suffer from inflation. It maintains itself as an investment asset with an increasing value over time. The limitation is hard-wired into Bitcoin’s source code and enforced by the network across the world.
Mining is the only way to create a new Bitcoin
The only way that new Bitcoin is created is as a reward for miners verifying new blocks. This means that each halving means fewer Bitcoin will be produced. The next halving, which is predicted to occur in 2024, will see the reward rate decrease to 3.125 BTC per block. By 2040, it is predicted that the block reward will be at less than 0.2 Bitcoin per block with 80,000 out of 21 million still left to be mined. According to predictions from calculations based on the history of Bitcoin mining, it will take close to 40 years for the last Bitcoin to be mined.
Are there risks in Bitcoin mining?
Bitcoin mining presents some interesting risks for those in the industry. The two main ones are:
- Price volatility
If Bitcoin price surges, those earning Bitcoin as a reward for their mining efforts benefit enormously. But if the market turns, then miners might not earn enough to make the process worthwhile. This is because Bitcoin mining is extremely energy-intense as it takes a massive amount of power to run the mining machines. When the market is aggressively volatile, it makes it difficult for miners to know whether their reward will outweigh the cost of mining. - Regulation
In some countries like China, Bitcoin mining has been outright banned and miners have had to move to maintain their work. As more countries look to regulate the cryptocurrency market, there is a risk involved in working in the industry.