Introduction
What happens when crypto reaches maximum supply? The maximum supply of a cryptocurrency refers to the maximum number of coins or tokens that will ever be created. Hence, once this number is reached, there will not be any new coins minted or produced in any form.
Typically, the maximum supply is capped by the limits defined by the underlying protocol of each digital asset. Hence, the maximum supply of new coins is defined during the launch of a project by said project’s source code.
A steady issuance rate with a predefined maximum supply is valuable for controlling the inflation rate of the cryptocurrency. This leads to a long-term appreciation of the asset. When the maximum supply is reached, there will be fewer coins that are available and circulating in the market. This creates market scarcity, which naturally increases the value of the coin.
There are some coins with no predefined maximum supply. For example, ETHereum’s blockchain has no predetermined maximum supply of Ether. On the other hand, Bitcoin has a maximum supply of 21 million. By design, the number of bitcoins minted per block is reduced by 50% after every 210,000 blocks, or about once every four years. It is therefore expected that the last block of bitcoin will be mined in the year 2140.
What happens when a cryptocurrency reaches maximum supply?
Let us take the example of Bitcoin. The year is 2140 and the bitcoin blockchain has just produced its last coin. Following which, miners will continue to be rewarded, but only with transaction processing fees.
It is generally expected that Bitcoin reaching its maximum supply will greatly affect Bitcoin miners. Because there is no need to mine and produce new blocks, miners may be unable to profit from block rewards anymore. However, if the Bitcoin blockchain in the year 2140 is able to process many transactions, then Bitcoin miners may still be able to earn profits from only transaction processing fees.
If Bitcoin mining ceases to be reliably profitable, then some negative outcomes may happen. For instance, selfish mining and mining from cartels may occur, with both instances commanding higher transaction fees.
In Conclusion
So, what happens when crypto reaches maximum supply? To be honest, nothing much. Prices may increase due to market scarcity, and transaction fees may be more expensive to compensate miners, but that is about it.
