In the early hours of Tuesday morning, the 630,000th bitcoin block was mined – triggering a new era in the cryptocurrency’s 12-year history as the reward for mining bitcoin blocks halved.
Bitcoin’s blockchain is designed such that the value of a mined bitcoin block – the number of bitcoins a miner earned for making calculations on the blockchain – halves with every 210,000 transaction blocks created.
This occurs at roughly four-year intervals.
When the first block was mined in 2008, each mined block would reward 50 bitcoins. In 2012, that reward was reduced to 25, and again down to 12.5 bitcoins in 2016.
Now bitcoin miners will see a reward of only 6.25 bitcoins per block.
The bitcoin protocol’s in-built scarcity means that only 21 million bitcoins can ever be produced – but that isn’t due to happen for another 120 years.
Meanwhile, the difficulty of producing a legitimate bitcoin hash increases roughly every two weeks, raising the cost of hardware and electricity for miners.
CEO of cryptocurrency mining company TAAL, Jerry Chan, said a sudden drop in the price of bitcoin could be devasting for some mining firms.
“If the price of bitcoin goes down, it will likely force weaker miners to wind down their operations," Chan told Forbes.
“They are selling the bitcoin in their treasury to pay off their financial commitments to the hashing farms for hosting and electricity.
“That constant liquidation is flooding the market to the downside, making it harder for other miners to continue to operate at a break even or profitable manner.”
At the current rate of $14,400 per bitcoin, each block is worth around $90,000.
Comparatively, this time last week, bitcoin was selling for $15,300 – its highest price since February. A block mined then, with a value of 12.5 bitcoins, would have been worth more than $191,000.
A message for the new era
The 630,000th bitcoin block, and first of the 6.25 era, was mined by AntPool, but it was the 629,999th block that caused a stir among the cryptocurrency community.
Chinese miners F2Pool embedded a message in the final 12.5 bitcoin block – ‘NYTimes 09/Apr/2020 With $2.3T Injection, Fed's Plan Far Exceeds 2008 Rescue’ – that references the US Federal Reserve’s announcement of quantitative easing measures designed to mitigate the effects of COVID-19 on the US stock exchange.
The final Bitcoin block with a subsidy of 12.5 BTC was mined by @f2pool_official and contained the following message in its coinbase transaction:— Jameson Lopp (@lopp) May 11, 2020
🐟NYTimes 09/Apr/2020 With $2.3T Injection, Fed's Plan Far Exceeds 2008 Rescuehttps://t.co/9dtTrC8YH6
It echoes a message left in mysterious bitcoin creator, Satoshi Nakamoto’s famous genesis block – the very beginning of the bitcoin blockchain.
Back in 2009, Nakamoto hid a message in the block’s data that read “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” – which acts as both a time stamp for bitcoin history, and apparent demonstration of the need for Nakamoto’s vision of a decentralised economy.
F2Pool co-founder, Wang Chun, told CoinDesk that the current financial situation shows once again the value of bitcoin as a means of decoupling from the established financial system.
"History has repeated,” Chun said. “Due to the coronavirus, there has been yet another ongoing wave of bailouts just like the one Satoshi had seen in 2008, but bigger in scale, like Bitcoin reinvented.
"Bitcoin [gave] people back the control, and their freedom, for the first time since banks took it over some 100 years ago.”