As of this weekend, 80% of all possible Bitcoins have been mined. As of 13th January 2018, over 16.8 million Bitcoins — out of a total of 21 million possible Bitcoins — have been mined. ‘To mine’ a bitcoin is the method for increasing the supply of Bitcoin. Basically, a computer – or a pool of computers – has to solve a mathematical problem before anyone else to mine a Bitcoin.
The Bitcoin code has been written in such a manner that to solve the mathematical problem is less about creating a smarter algorithm, and more about using as much processing power as possible. This is because the problem is not a difficult equation that needs solving; rather it is just a question of odds. The process can be likened to getting two heads in a row in multiple coin tosses. There is no way of predicting who will get there first – apart from the person who can flip the coin the fastest.
This may seem like simple enough odds, but as more Bitcoins are mined, the more complicated the problem becomes. From 2 heads in a row, it goes up to 20 in a row, and upwards and onwards forever. The only way to keep up with these odds is to toss the coin faster and faster – i.e. keep boosting the processing power of your mining computer.
However, as the amount of processing power goes up, the amount of electricity needs to go up. Considering that the amount of energy needed to mine Bitcoin is already nearly equivalent to that of New Zealand
at the time of writing, the environmental cost of the process is already in dangerous territory.
Why is Bitcoin supply limited?
When Bitcoin was originally created by the anonymous Satoshi Nakamoto in 2009, it was a decentralised currency alternative to the monetary system that had failed the world during the last global financial recession. As such, Nakamoto realised that a currency is only worth anything if the supply is limited. After all, if the Indian government printed unlimited rupees, the notes would be worthless.
Of course, as brilliant as the original coders of Bitcoin were, they failed to recognise that Bitcoin mining would eventually lead to such drastic energy usage. Additionally, they could not have predicted that Bitcoin and other cryptocurrencies would go mainstream as speculative assets rather than as a replacement for fiat currencies.
Finally, Nakamoto also put in one last line of code to protect the decentralised nature of Bitcoin – as the supply of mineable Bitcoin becomes more scarce, the amount of Bitcoins you can mine at one given time halves at strategic intervals. Currently, the next halving is predicted to happen in two years. By then, the power needed to mine Bitcoins could become so expensive that only the uber-rich and governments could even afford it.