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Bitcoin has been around since 2009, but its only been the last few years where its been on the map of the average investor. Thats likely due to the fact that the price of Bitcoin has absolutely exploded. Even after dropping over 50% from its high in 2021, Bitcoin is still up over 250% over the last year, and over 32,500% since 2014. Whereas lots of investors have gotten excited over the prospect of becoming rich by investing in Bitcoin, not many people fully understand exactly what Bitcoin is or how it works. For example, you may have heard that the total number of Bitcoin allowed to exist is limited. But, how is that possible, and what does it mean? Will Bitcoin ever run out?

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Heres a quick overview of how Bitcoin is produced, how it can be limited and what it all means for the future of the cryptocurrency.

While the mechanics of the operations can get a bit confusing, Bitcoin is produced by miners, but electronic miners rather than physical miners. The way it works is that Bitcoin miners record transactions on the blockchain, which is a decentralized ledger. To record a transaction, miners must solve complex algorithms using massive computer power. Once a transaction is recorded, which occurs about every 10 minutes on average, the miner is rewarded with Bitcoin. Currently, the reward for miners is 6.25 Bitcoin, but this amount is halved every four years. In 2009, when Bitcoin was first developed, the reward was 50 Bitcoin. Its estimated that the next halving will be in 2024, when the reward will drop to 3.125 Bitcoin.

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Under the mining system, it might seem like there would be no limit to the amount of Bitcoin that could be produced. However, the way its source code is written, there can be no more Bitcoin produced once 21 million coins are in the system. The way the mining system is set up means that the final Bitcoin wont be mined until about 2140, however. So, although the production rate will slow, there will still be new Bitcoin coming online for over 100 years.

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Bitcoin will never run out, as there have already been over 18 million Bitcoin mined and there will ultimately be 21 million in the system. However, the introduction of new supply will eventually stop. This is one of the reasons Bitcoin bulls aggressively tout the cryptocurrency. In their opinion, increasing demand for Bitcoin will eventually overcome the limited supply, thereby driving up prices exponentially.

This could prove true, as more and more businesses and even countries are beginning to accept Bitcoin as a valid form of currency. El Salvador, for example, became the first country to accept Bitcoin as legal tender on June 9. However, the future demand for Bitcoin is still far from certain, which is part of the reason there are such wild swings in its price.

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Last updated: July 29, 2021

This article originally appeared on GOBankingRates.com: Will Bitcoin Ever Run Out?

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Will Bitcoin Ever Run Out? - Yahoo Finance