Quote from: willmoss on April 23, 2011, 02:12:16 PM

Hey guys

MB this has been approached already, but I couldn't find it on the forums.

What happens when we reach maximum allocation of BitCoins?

Currently there are about 6m coins in circulation. I believe the maximum is 21m. I don't know the rate of creation, but I read somewhere than theoretically in 50 years time all the coins that can ever be created will be in circulation.

Question is: What then

At the moment, the nodes supporting the network are incentivised because they get paid a certain amount of coins per transaction, which they are allowed to create.

However when #BTC = 21m, nodes will not be allowed to create any more BTC.

So what incentives are there at that point for nodes to continue supporting the system?

Bitcoins will always be created. The cap of 21M is just artificial. It is a result of the imposed rate of exchange between the bitcoins attributed to new blocks w.r.t. old blocks. The blocks will still be created at a constant rate, which means that the rate of supply inflation in terms of blocks is ~1/t, while the rate of supply inflation in terms of bitcoins (with the current imposes geometric fall-off) is ~1/t * e^-t.
But people forget that, unlike gold, bitcoins (or for that matter blocks) are not all identical. They have an age. This is bound to have consequences for the relative market price. At some point in time old bitcoins (read blocks) will be values different from new ones.
I have not investigated all the relevant factors that will determine the price(block age) but I doubt that it will remain exactly as prescribed by the current bitcoin client.
Note that, currently there is no way to select exactly which bitcoins you want to send to someone. But there may be very good reasons to add that feature to the bitcoin client. As soon this is done, people may prefer to have old coins or new ones.... I don't know...