Bitcoin is programmed to have a maximum supply of 21 million coins, with diminishing mining returns accomplished by cutting the mining block reward in half every 210,000 blocks, until eventually no more Bitcoins are mined. This article explores the past, present, and future of Bitcoin block halving, and its impact on mining revenue and profitability.
Initially, the reward was BTC 50 per block and this was the case until 28 November 2012 when block 210,000 was reached. At that point, the reward was halved to BTC 25, a reduction from USD 1,250 to USD 625 at the time. Bitcoin price strongly increased after that though, and when the next block halving occurred on 9 July 2016, which brought the reward down to BTC 12.5, this represented a decrease in the block reward from USD 16,500 to USD 8,250. This was the last time the reward halved and as can be seen, Bitcoin price has been increasing so strongly long term, that even with block halvings, Bitcoin miners are receiving more revenue than ever from each block. Right now, the block reward is worth roughly USD 84,000.
As of this writing on 26 August 2018, Bitcoin is at block #538,658, 56.5% of the way towards the next block having at 630,000 when the reward will be reduced to BTC 6.25 per block. This is on track to occur in April or May 2020; the timing can’t be measured exactly. Bitcoin has an average block time of 10 minutes, but this isn’t exact and tends to be an overestimate since hash rate is strongly increasing long term, but the difficulty which controls the block time is only updated every 2,016 blocks, about every two weeks.
It is important to note that most of the Bitcoins that will ever exist have already been mined, with 17.233 million Bitcoins in circulation, or 82% of the total supply. This means that only 3.77 million Bitcoins will ever be mined for the rest of history, making it quite obvious that mining revenue in terms of Bitcoin will inevitably dry up. However, if Bitcoin continues its long-term trend of increasing in price by orders of magnitude, then future transaction fees in each block might be worth as much as the block reward currently, in terms of USD.
The next block halving after 2020 will be at block #840,000. This will likely be in 2024, since mathematically at a block time of 10 minutes the block halving is every four years. There will likely be block halvings around 2028, 2032, 2036, 2040, and so on and so forth, until eventually the block reward will be less than the smallest unit of Bitcoin, 1 satoshi. Once the block reward declines below 1 satoshi it will become zero and no more Bitcoins will ever be mined, miners will only be paid with transaction fees. This will occur at the 33rd block halving, approximately but not exactly 132 years after the genesis of Bitcoin which is the year 2,141, depending on the future acceleration and deceleration of the hash rate.
Although block halvings appear to put strain on Bitcoin miners via chopping revenue in half, long-term block halvings are integral to the limited supply of Bitcoin.
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