Bitcoin Block Reward Halved

Block reward halved

Bitcoin reached its 210.000th block on the 28th of November. After this, the rate at which Bitcoins are generated will be permanently be cut down by a factor of two. The generated blocks will only award 25BTC instead of 50BTC before.

It will happen again

The halving will happen again. Bitcoin halves after every 210.000 generated blocks. The next time will be when 420.000 block have been generated. This will be in approximately 4 years, the time is predictable because the Bitcoin protocol is set up to aim for block generation every 10 minutes.

What will it do to the price

It would seem logical that the price doubles although this is not expected on short term. If the price were to double many people trading Bitcoins will see enormous profits. These profits will be turned into cash by many people which will have a dampening effect on the price. I only expect to see a temporary rise after the block reward halving with price drops not too long after that. The price will rise in the long term but due to the high volatility this will be be a long and bumpy rise.

Mining evolution

The timing of the block reward halving is also close to a major new development in bitcoin mining, ASICs. The first ASICs are predicted to ship in the beginning of 2013 and their announced hash rates start at 4.000 Mhash/s up to 1.500.000 Mhash/s. To reach 4.000 Mhash/s today with GPU’s you’re going to need a rig with about 6 AMD7970’s. This costs a lot of money and besides the cost of the hardware, electricity cost is also an issue. The most efficient graphics cards can do up to 2.5 Mhash per Joule, ASICs are predicted to reach 1000 Mhash per Joule which makes them much cheaper then GPUs in the long run.

Conclusion

The block reward halving won’t make too much difference for the price on short term but it will halve the supply. Don’t expect a major rise and expect it to go up slowly. The growth will be volatile however and with ASICs coming next year making current mining less profitable it is a good question what 2013 will bring for bitcoin. Perhaps an interesting time if you’re into trading Bitcoins, ride the waves.

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