The Bitcoin Espresso ☕ #10 — EU Crypto Regulations & What happens when all 21 million Bitcoin have been mined?
Welcome to this week’s The Bitcoin Espresso! Whether you’re interested in Bitcoin, have just bought your first fractions of Bitcoin, or want to dive deeper into the space — this newsletter is for you. Find out more about the motivation behind this newsletter in the introduction post. Want more news? Follow @thebitcoinespresso on Twitter to stay on top of things between newsletters.
🎆 You may have noticed that I was on a holiday break last week. I intended to send the week’s newsletter but found that the Bitcoin space seemed to rest as well. Instead of boring you with slow news, I decided to write to you once we see action again. So welcome back and a happy new year everyone! 🎆
Weekly Summary: Bitcoin’s price followed a downtrend since the last newsletter and had a significant move recently. Federal Reserve officials said they might speed up their timeline to raise interest rates and reduce asset purchases to counter high inflation. The news shook the stock markets a bit. Bitcoin followed along since it is seen as an inflation hedge by many. Zoom out of the price chart, take your time before deciding if and how you want to react, and feel free to consult the ‟Having a Plan″ article in The Bitcoin Espresso #2 that provides some guidance if you’re unsure. Today’s news covers a NASDAQ-listed company paying dividends in Bitcoin, upcoming EU cryptocurrency regulations, and Melania Trump tweeting about Bitcoin. This edition’s coffee chat answers what happens when all 21 million Bitcoin have been mined.
A quick tip: There’s an explanation of words and abbreviations in the Fundamentals Glossary at the bottom.
📰 Essential News
BTCS announces Bitcoin Dividends: BTCS, a company listed on NASDAQ, will be paying a portion of their earnings to shareholders in Bitcoin. This dividend provides an easy on-ramp for people new to Bitcoin since it only requires a Bitcoin wallet — it’s a method to get Bitcoin without going through the effort to buy Bitcoin using a cryptocurrency exchange. It’s certainly an interesting development to see companies paying dividends in Bitcoin.
EU Cyptocurrency Regulation Negotiations: The ‟Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937″ went into the next phase of negotiations. They notice that ‟When used as a means of payment, payment tokens [like Bitcoin] can present opportunities in terms of cheaper, faster and more efficient payments, in particular on a cross-border basis, by limiting the number of intermediaries.″ The regulation seems to be pro-innovation. ‟The lack of an overall Union framework for crypto-assets can lead to a lack of users’ confidence in those assets, which could significantly hinder the development of a market in those assets and can lead to missed opportunities in terms of innovative digital services, alternative payment instruments or new funding sources for Union companies.″ Nevertheless, the document seems to agree with the IMF Global Financial Stability Report in being very strict about Stablecoins. The document seems to be a compromise between embracing innovation and clamping down on particular areas of development in the cryptocurrency space. A good summary can be found on Reddit.
Melania Trump Tweets About Bitcoin: At times, when working on this newsletter, I lean back and smile about sentences I’d never thought I’d write. Melania Trump, a first lady of the U.S., has tweeted about the 13th anniversary of Bitcoin. While the assumption that it was a marketing move to advertise a cryptocurrency project of hers isn’t far-reaching, it shows that Bitcoin is becoming a topic of discussion more and more.
🛋️Coffee Chat: What happens when all 21 million Bitcoin have been mined?
In The Bitcoin Espresso #1, we have discussed the halving event, which reduces the amount of Bitcoin created in regular intervals. Since the supply of Bitcoin is limited to 21 million, this mechanism will eventually lead to all Bitcoin having been mined. While that is estimated to be in the year 2140, the question arises if that means the Bitcoin network will stop working at that point.
Bitcoin mining is the processing of transactions in the Bitcoin network by creating digital blocks. There are two mechanisms to incentivize miners for their work. Firstly, they are granted a block reward, earning them newly created Bitcoin. Secondly, they get the transaction fees of the transactions contained in the block. Once all Bitcoin are mined, the block reward is gone, but miners will still receive transaction fees for their continued work.
While transaction fees are negligible currently, these fees could become more meaningful with the increasing price of Bitcoin and the number of transactions that can fit into a block. I consider in-depth consideration of this rather academic since it includes predicting how technology evolves over the next 118 years. I would argue that Bitcoin already has a viable mechanism to continue running beyond 2140 and that we have enough time if there is a need to adjust. Nevertheless, if you’re curious about a few possible scenarios, head over to Investopedia’s article on the topic.
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💡 Fundamentals Glossary
Cryptocurrency … A digital currency that uses cryptography to prevent counterfeiting and fraudulent transactions. There are other cryptocurrencies besides Bitcoin.
Halving Cycle … Roughly every four years, the amount of new Bitcoin created is cut in half. This is called the Bitcoin halving. The time between Bitcoin halvings is referred to as a halving cycle.
Fed (Fed) … The Federal Reserve System is the central banking system of the U.S.
Stablecoin … A cryptocurrency that aims to maintain the value of a specific asset (often the U.S. dollar).
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Some statements contained in this article may be of future expectations that are based on our current views and assumptions and involve uncertainties that could cause actual results, performance, or events that differ from those statements.