Let’s talk a little more about Bitcoin mining. We talked about how Bitcoin is, in its basest sense, a currency ledger system. The upkeep of the ledger falls to the ‘miners’ who turn computing power towards the Bitcoin network, upkeep the ledger, and are rewarded for their work in Bitcoin. From an economic standpoint, you can think of it as the miners are printing money.
As new blocks are added to the blockchain, whomever mined that block gets the reward. Let’s examine a block that was just (at the time of this writing) ‘mined’ onto the Bitcoin blockchain.
Alright, let’s break down what we’re looking at here as it relates to this article. We’ll start with the transactions (sometimes shortened as tx/s). In this block the miner confirmed 1,525 transactions, i.e., Bitcoin moving from one wallet to another wallet. The ‘height’ is where it lies in the blockchain, the timestamps are when it was mined, the ‘Relayed by’ part is who mined the Block, in this case it was a mining pool in China, but the part we want to talk about here is the Block Reward.
The block reward is 25 Bitcoins per block, at the time of this writing, that’s $14,000 per block mined, around $580 per Bitcoin. Let’s travel back in time to a block from 2012.
Notice the block reward. 50 BTC, at today’s rate that’s $28,000. In September, 2012, when this block was mined, the reward of 50 BTC was worth $600, or around $12 per Bitcoin.
When Satoshi developed Bitcoin, a system was put in place to limit the amount of Bitcoin that will be released. That means that there will only ever be a specific amount of Bitcoins produced through mining. The next halving is at block 420,000, the last halving happened at 210,000, and the subsequent one will be at 630,000. So, every 210,000 blocks mined the reward is halved.
If you’re doing some simple math, you’re coming to the realization that this is only the second halving that Bitcoin has experienced. The reward will go from 25 Bitcoin per block to 12.5 Bitcoin per block (at the time of this writing, a little over a month away), and the subsequent halving (tentatively expected sometime in 2021) will bring it to 6.25 per block. Take into account the fact that many Bitcoin have simply been lost in the system, and you start to see that not only does Bitcoin have a finite supply but it currently has a dwindling supply. One day, so few Bitcoin will be produced per block reward as to be inconsequential, estimated sometime around the year 2140 no more Bitcoin will be produced. The incentive to keep miner’s mining at this point will be the transaction fees gained by upkeeping the ledger. In its entire history there will only ever be around 21,000,000 Bitcoin. As of this writing, there are already 15,000,000 in circulation.
As you can see, more than 2/3 of all Bitcoin that will ever be produced have already been produced. This deflationary model coded into Bitcoin has some people concerned, but in general no one really knows how it will play out. Being that we’re just about to experience the second such halving event what happens in the coming months and years could determine the future of Bitcoin. Perhaps the price will skyrocket, or perhaps it will fall into a steady baseline, or some pessimists think it may sink like a rock.
No matter the outcome, it should be interesting to watch! How about get into some slot games, gather up some Bitcoin and see if the price increases over the coming months!