Bitcoin was invented as a cashless peer-to-peer cashless network, promising
Bitcoin was invented as a cashless peer-to-peer cashless network, promising an equal opportunity to everyone. The best thing about Bitcoin apart from the decentralization aspect is the Block reward.
Block reward is given for verifying transactions on the Bitcoin network, and anyone with a suitable computer or mining rig can participate in the process and earn the block reward in return. The process of transaction verification is called mining, and there are fixed block rewards for solving each block of transactions.
The current Block Reward for solving one block on the Bitcoin Blockchain is 12.5 BTC. Block Rewards gets halved after every 210,000 of blocks gets mined, and the average time for halving comes around 4 years. Thus, after every 4 years, the reward for solving the blocks is reduced to half of the current reward.
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Bitcoin Halving: A Timeline
Bitcoin Blockchain makes use of Proof of Work consortium algorithm to verify transactions on the network. Proof of Work makes use of hashing protocol, where each transaction on the network is encrypted with a 256-bit cryptographic signature which has a pre-defined output. Thus, anyone with enough processing power can verify these transactions and earn Block reward in return. However, if anyone tries to alter the input, the output is completely different, thus the name proof of work.
When Bitcoin was launched back in 2009, the mining reward was 25 BTC which was halved back in 2016 to 12.5 BTC after 210,000 blocks got mined. The next halving is scheduled for 2020 when the block reward will be reduced to 6.25 BTC.
The block rewards are one of the aspects of decentralized cryptocurrencies, where every peer on the network has an equal opportunity to earn that reward given they have the computational power to verify transactions.
Since 2017 price rise, the mining scene has become quite crowded as people realized that buying Bitcoin directly against fiat is very expensive. However, as Bitcoin became more mainstream and the number of people mining blocks increased significantly, the mining scene got crowded and earning full block rewards almost became impossible as a number of peers are putting their hash-power to solve the block earlier than others.
Later mining farms came in which has the resources and the funds to run multiple powerful mining rigs simultaneously for round the clock making it more difficult for individual miners to earn a share in the block reward. Below is the timeline of the next Bitcoin halving,
| Total Bitcoins in circulation: | 17,571,500 |
| Total Bitcoins to ever be produced: | 21,000,000 |
| Percentage of total Bitcoins mined: | 83.67% |
| Total Bitcoins left to mine: | 3,428,500 |
| Total Bitcoins left to mine until next blockhalf: | 803,500 |
| Bitcoin price (USD): | $3,805.10 |
| Market capitalization (USD): | $66,861,314,650.00 |
| Bitcoins generated per day: | 1,800 |
| Bitcoin inflation rate per annum: | 3.81% |
| Bitcoin inflation rate per annum at next block halving event: | 1.80% |
| Bitcoin inflation per day (USD): | $6,849,180 |
| Bitcoin inflation until next block half event based on current price (USD) | $3,057,397,850 |
| Total blocks | 565,720 |
| Blocks until mining reward is halved | 64,280 |
| Total number of block reward halvings | 2 |
| Approximate block generation time | 10.00 minutes |
| Approximate blocks generated per day | 144 |
| Difficulty | 6,071,846,049,921 |
| Hash rate | 40.17 Exahashes/s |
source: https: Bitcoin Block Half
What Would Happen When The Block Reward Becomes Zero?
Bitcoin Block Reward started at 25 BTC for those who can solve the blocks earliest, the current block reward stands at 12.5 BTC and within 2 years it would become 6.25 BTC. The current situation of centralization in the mining scene due to a monopoly of Mining farms have already been a cause of worry in the community.
However, even the bigger concern is. what would happen when the Block reward becomes zero? Who would verify the transactions once there is no reward for the miners? Will the transaction verification process would be done using some other protocol?
At the current rate of block verification, the total supply of Bitcoin i.e 21 million is scheduled to be mined by 2140, but even after all the supply of Bitcoin gets mined, bitcoin transaction would still be required to be verified People believe that the miner community will be dependent on the transaction verification rewards set by the users.
For anyone to get their transaction verified, the users associate a verification reward with their transaction. The higher the transaction fee, the better the chances that the miner picks your transaction before others. Thus, once all the Bitcoins are mined, many believe the transaction fee would play a very important role in order to0 maintain the decentralization aspect of the Bitcoin network.
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Final Thoughts
Block Reward For miners plays a very important role in maintaining the decentralization aspect, thus people are worried whether the Bitcoin network would suffer once all the supply of Bitcoin gets mined.
However, looking at the timeline, that would happen only after a hundred years, when we compare it with the current timeline of 10 years, chances are developers would find a way to resolve the issue before it hampers the network. Even if we go by the current theory of transaction fee, the verifying of transactions won’t be hampered.
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