Bitcoin Mining Reward About To Halve

First time accepted submitter ASDFnz writes "The reward for successfully completing a block (also called mining) is about to halve from 50 bitcoins to 25. From the article: 'Bitcoin is built so that this reward is halved every 210,000 blocks solved. The idea is as bitcoin grows the transaction fees become the main part of the reward and the introduction of new bitcoins slows down to a trickle. This also means that there will only ever be 21,000,000 bitcoins in circulation.' You can watch the countdown here."

Comments

Quick, calculate me another way to profit.

[Anonymous Coward]

My parents won't let me mooch off their electricty forever.

Re:Quick, calculate me another way to profit.

[cultiv8]

So rent an apartment where electricity is included; most rental agreements don't have anything that specifically forbids bitcoin mining.

Re:Quick, calculate me another way to profit.

[icebraining]

Communism never meant you could use whatever you want; not in theory, nor in practice. The principle was "to each according to his need".

Re:Quick, calculate me another way to profit.

[Opportunist]

The incentive to work in capitalism is just as shallow, just better veiled, but it starts to fall apart as well now. And please apologize when I ignore the rest of the diatribe. I have no idea where you pull those examples out of, but I better not touch that place.

In communism, the promise was "work hard, and soon in the future we'll all be living in the socialist worker paradise". Well, people started out believing in it. No, seriously. I'm serious. Look at how Russia developed in the 1920s, they turned from a backwards agrarian society that was close to a feudal system into an industry nation within a few years. At a horrible price, no doubt about that, but people believed in it and pulled through. Well, guess what, it didn't work out. And after WW2, it became plainly obvious to everyone that this "work hard and soon we'll all be living better" is an empty promise. Especially when you see how on one hand the party idiots are being promoted and have access to things you can only dream of, and that no kind of work or butt kissing will ever give you the same. You may get ahead a bit compared to your peers if you are a "more loyal comrade", but it's just the crumbs from the cake the big players eat, and that's a circle you cannot climb into, no matter how much you try, it's a closed circle of "friends" that matched and mingled in party organizations and party training camps. Your only chance to get access to at least those crumbs is that you work extra hard "for the greater good", volunteer for "extra duty" and similar crap.

The joke is now that capitalism works actually the same way. Well, not quite the same way, it's different empty promises and different approach, but the end result is exactly the same. The promise of capitalism is "being rich is the goal, because money can buy whatever you need, work hard and one day you have the chance to be rich too". Well, some people buy into that. Most, actually. No system could exist without enough people supporting or at the very least not sensibly opposing it. But it becomes more and more obvious that the promise is shallow, too. No amount of work will ever elevate you to the executive levels of the big corporations where the big bucks are being handed out. That's a closed circle of people who know each other from various fraternities or buddies from the same schools. Schools that you couldn't go to because your parents are not rich enough to send you there. Because they didn't have a degree from said schools to get into a position that... you get the idea, right?

Money stays amongst itself, there's no butting in for you, peasant. But if you work extra hard, you might get promoted in the office treadmill, you'll get some bullshit title and you'll feel important because now you make the big bucks, i.e. like 200 bucks more per month. But "rich", in the capitalist sense, you'll never be. Neither you, nor your kids.

So, essentially, whether you call it communism and make party loyalty the decider between powerful and peasant, or whether you call it capitalism and use money for the same, it's not that much of a difference. If you're not in the correct circles, if you're not with the right people, you won't get anywhere in either system. The reason capitalism works better is simply that it's harder to see through, that the lie of "everyone can get rich if you work hard enough" is compelling, especially if you get to hear about someone actually "making it". In communism, those people were "worker of the month", btw, and had about as much influence on your well being. Well, maybe it upped your monthly quota because obviously it's possible. In capitalist terms, I guess it would be something akin to "why hand out wellfare, you see there is that one guy that made it, why can't they?"

Re:Quick, calculate me another way to profit.

[bondsbw]

But then how do I get what I want?

It's not like communism magically changes everyone's hearts to love and selflessness.

Austrian economics

[dytin]

Bitcoin is the greatest real-world experiment in Austrian economics. For once we'll get to actually see if a "deflationary spiral" will actually occur when the rate of money creation slows, or if the Keyensians were just full of it. Whether bitcoin actually succeeds or not, we'll at least get some really good data.

Re:Austrian economics

[Dast]

Sounds questionable to me. Going by the definition on wikipedia:

"A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price.

If nobody is really pricing goods in bitcoins and nobody is getting paid in bitcoins, how could the feedback cycle that would normally cause a deflationary spiral exist? Even if bitcoins deflate massively, I don't think that necessarily proves the Keyensians right.

Re:Austrian economics

[grumbel]

What problem does it solve for normal people?

It provides a censorship free way to transfer small amounts of money pseudonymously over the Internet, something regular payment providers still fail at (Paypal censors, proper bank transfers are far to expensive).

Re:Austrian economics

[Wizard Drongo]

There are services that will do this for you (ie. allow you to buy from Amazon using 'coin.) Admittedly, you're then beholden to that third-party who actually does the buying in your stead, rather than direct with Amazon, but nonetheless, without changing bitcoin into another currency, you can buy stuff on Amazon, and eBay, and a number of other sites, not to mention the ton of smaller, but no-less-useful sites that allow you to trade directly using Bitcoin...

Re:Seems like the limit is too low for a viable

[Wonko the Sane]

Yea it's too bad nobody ever though of that or else they might have made sure each one is divisible to eight decimal places or something.

Re:Bitcoins built-in failure

[francium de neobie]

A BitCoin can be divided up into 8 decimal digits. So one BitCoin contains 1 billion discrete units that can be used for transactions.

Re:What does it calculate?

[ais523]

It's a proof-of-work calculation that records a transaction history. Basically, it's to prevent double-spending; if someone attempts to transfer the same bitcoin to two different people, the person who gets it is the person who had more computational effort go into recording them as having it. If the amount of computational effort in recording transaction histories were low enough, someone could double-spend by recording an alternative history on a powerful computer and having it supersede the transaction history everyone thought they were using.

In order to encourage people to put effort into recording the history, there's a reward for doing so. This lead (perhaps predictably) to "mining", where people race to record the transaction history first in order to get the reward.

So there is a purpose to mining, but it's only to keep the Bitcoin system itself running. If people stopped mining (perhaps because the reward got low enough), Bitcoin would collapse. (It's envisaged that once the mining reward gets low enough, people transferring bitcoins will pay a transfer fee to the miners to encourage them to keep mining, and they'd get their income that way instead.)

Re:who cares?

[Teppy]

They're being used quite a bit for online gambling because they allow for instant deposits, instant withdrawals, zero risk of charge-back, and for some online casinos, provably fair wagering.

Additionally

[betterunixthanunix]

Bitcoin will let us see if money is something that can truly exist without government, or if the anarchists were full of it. Bitcoin's success or failure will almost certainly tell us more about this than about deflationary spirals.

Re:Additionally

[PCM2]

I think it will tell us that even in the most optimistic scenerio where Bitcoin achieves 100% market penetration, some people will go to their graves insisting that it won't work, isn't really money, and is all just a ponzi scheme.

Conversely, if Bitcoin is around for 100 years and nobody but a handful of extreme-right libertarians thinks it's worth so much as a wooden nickel, we will have learned empirically that some people will always go to their graves still wishing for a pony.

Re:Additionally

[tftp]

And yet I have more than a few friends who actively replace their surplus currency with gold, whenever they can

Those are two big differences, as they say in Odessa. Purchasing physical gold from a reputable dealer (and taking delivery) is entirely unlike accepting a bar of unknown yellow metal from a stranger who just walked into your business and left with an expensive product just minutes later, never to be seen again.

But I understand what you (and your friends) want to say. Unfortunately, preparing for TEOTWAWKI is counter to preparing for normal life. Your purchases are basically reversed. Most people cannot afford the bunker mentality, just because they need income from investments, they need to buy luxury items for their family, toys for their children, non-MRE food for everyday eating. There must be a balance, an exact instant in time when you understand that the life as you know it is not in the cards - and then you flip the bit and start working for the cellar.

I personally don't believe gold will be valuable after the SHTF. You cannot eat gold - and food will be the top priority, competing for the first place with means of protection (weapons and ammo.) Gold cannot be sold after SHTF because there will be no market. You can always exchange a .223 round for a few cigarettes, and that barter does not require a market because both goods are directly usable. Gold is not usable, unless you need sinkers for fishing. Gold has to be exchanged on a market for something else that you need.

My personal theory is that after SHTF there will be only two universal currencies: food and ammo. Nothing else will be even close. Perhaps ammo will be even more valuable because you cannot eat if you are dead; but if you have ammo you can get food (in the forest or elsewhere.) Additionally, food can be produced - cows don't read newspapers and they will continue their lifecycle. But ammo is a high-tech product, it cannot be easily put together even if you are into reloading. Once you run out of good cartridges and primers you are done for, even if you can cast your own [low quality] bullets.

I have had no more success trying to convince them that conducting an economy based on precious metals after the collapse of American society will be difficult

As you see, I'm not disagreeing with you here.

the collapse of society -- for which they have also been stockpiling assault rifles, BTW -- is unlikely to occur in their lifetimes.

That is not under our control. Do you think Syrians or Libyans or even Egyptians expected the Spanish Inquisition just a few years ago? But here they are now, in the midst of a civil war, or on ruins of a wealthy oil state, or preparing for said ruins to be made. Do not forget that the fall of USSR was news to places like CIA - which should have known; but they missed that and more. After USSR disintegrated several civil wars have broken out; some are still simmering. And if you look back into 1990-2000 you will see rich, happy Yugoslavia going up in smoke.

The USA has a very fragile economy. First, it's an oil-based economy. No food can be grown or delivered without oil. Significant amounts of that oil come from abroad. There are needs that cannot be cut, so even a 20% cut in supplies will send the prices of gas to the sky - and the prices of food will follow. Oil is bought for dollars, and dollars are borrowed. Same happens with much of everything else that we currently receive on ships from China. This means that the country lives on credits - and the creditors may not be willing to finance this economy forever. In essence, not only I and you are not in control of the exact date of TEOTWAWKI, but even the government is not in control. The USA has too few native industries with exportable products to finance purchase of foreign energy; and domestic energy production is limited. I do not know for how long this economy will last, but it cannot last

Oh God No...

[hawks5999]

Get rid of them now. I suggest you send any bitcoins you have to this wallet address: 1AeCTNhF3Sovi8fkjq7Buy8sYoc2C4xoo4

Re:who cares?

[Wonko the Sane]

There are also a few VPS and VPN providers who accept bitcoins for the same reasons, and because now they can sell their services to customers anywhere in the world without being limtited by the legacy banking system's inability to process payments from certain places.

Re:Bitcoins built-in failure

[Kjella]

1) One BitCoin and one account is as good as the other, so you can swap them outside the system. I can send you 100 BTC from my account A to your account B, then get back 50, 25 and 25 BTC back randomly delayed from your other account C to my other account D. Sure, all the transactions are public record but there's no link between the 100 BTC I used to have in A and the 100 BTC I have now in D. Only the swapping service could possibly link those transactions together.
2) If you can both acquire and spend your money anonymously then the transactions are meaningless, say you do anonymous rent-a-coder work for BTC and use those BTC to pay for web hosting that you only access anonymously. That's the essence of a currency right there, you can make money for doing work and then spend it on what you choose. Yes if any point you're tied to an identity they can try rolling transactions both forwards and backwards to see where you got money from and what you spent money on.

That's not really one of the problems with BitCoins, the main reason is exactly this that the supply is diminishing. Hoarding old coins from when they were easy to make only seems like a better and better idea, unless of course the BitCoin economy collapses because everyone's hoarding. I bet a lot of the people that offer services for BitCoin are the same as those hoarding large BTC reserves, the pyramid game only works if they can sucker more people to join in.

Re:Bitcoins built-in failure

[LordLucless]

Yep. That's a feature of any currency without inflation, and why inflation is actually a good thing. It discourages hoarding. Neutral or deflationary currencies are only good for the people who already have a lot of them.

I'm a Happy Camper

[johnnysmith2012]

Since now they girls doing video clips for bitcoins! http://www.videos4btc.info/

I wonder...

[fuzzyfuzzyfungus]

I'm no crypto expert; but it was my layman's understanding that the bitcoin setup is(barring presently unknown attacks) unforgeable; but that there is nothing particularly special about the "Genesis block" at the beginning of the bitcoin block chain, aside from mutual acceptance of it.

Given that, while it is not possible to forge a bitcoin or to produce more than 21,000,000 of them, it should be possible for anybody who feels like it to simply define a new Genesis block and go hashing merrily away. The products of this block chain will be distinguishable from the products of any other block chain; but user convention could assign them value in exactly the same way as it did the old ones(or, more probably, they would trade at a discount against the 'original' bitcoins).

Any speculation on whether the people-who-care-about-bitcoins of the world are sufficiently rabid about some sort of deflationary theory of currency to prevent that, or will we start seeing N different distinct block chains trading between one another as well as select real world commodities?

Re:Quick find all the people that care

[Anonymous Coward]

Gold has actual mechanical uses (electrical contacts.) It also has bauble value.

BitCoins have zero intrinsic value, and they require electric and Internet connectivity to be used. Gold requires a civilization level just a step above pure anarchy to be useful.

IMHO, it is sort of suspicious that there is this ramp where early adopters get these bonuses, and people hopping on late end up having to put a lot more resources in for the same coins... that combined with the value of the currency going up/down in insane swings, makes it useless as anything other than a novelty.

Who cares, the mining game is over anyways.

[Anonymous Coward]

I used to be big on the BTC mining thing. These days, however, it just doesn't matter anymore.

I got into BTC fairly early, back when it was profitable to run the mining software on a single workstation to suck up unused cycles. At that time, it was actually profitable to invest in dedicated hardware to mine coins- so I (and a lot of other people) eventually did. My first dedicated rig was a HP ML350 G5, which set me back about $4000. It ran two 8 core processors and basically sat around all day mining bitcoins.

Later on when the GPU accelerated mining took off, I bought and built four systems from off the shelf components, and the ML350 was rededicated to running ESXi with a bunch of VMs for mining and managing the four slaves. Each slave had 3x ATI GPUs, later those were swapped out for NVidia GPUs for other various software reasons.

Then the FPGA (and later ASIC) players came into the game. It started with development boards (FPGA boards purchased direct from the chip manufacture), but later spiralled into custom FPGA boards in nice cases that you could stack or keep around on a metal shelving system easily enough. Now, the custom FPGA boxes for BTC mining basically put the GPU miners out of business- the introduction of FPGA hardware increased the BTC mining difficulty to the point that it was pointless wasting the power mining with anything other then.

The problem was that by the time the FPGA market exploded, it was *barely* worth investing in the hardware to get in that late in the game. Previously, buying a few PCs and loading them with GPUs was a cheap way to make some extra cash. FPGAs however cost a hell of a lot more and the difficulty of mining BTCs had increased so much that you would barely break even, and you'd be bloody lucky if you actually made any money in the end.

But FPGAs weren't good enough. People started thinking that they could build silicon to do things even faster, and thus the ASIC market started to emerge and take off. The problem here is that while an ASIC kicks the shit out of an FPGA (and anything that came before the FPGAs)- they're so expensive and the BTC difficulty has been bumped up so much by the initial ASIC wave and the FPGAs before it... That... Wait for it...

Investing in ANY form of ASICs to make **any** kind of reasonable money... Means that you'll never actually break even.

That's right, the ASICs they've got out there are so powerful and the BTC chain is becoming so difficult to mine, that if you invested $10K+ (which is what you'd have to spend) for a reasonable ASIC setup- you would never actually make any money. If your ASIC box is profitable, it won't be for long since the more ASIC miners join in on the party- the more difficult it becomes to mine BTCs.

So the whole system has kind of spiralled into nothing. Mining isn't profitable anymore. Even if you invest in serious hardware. It just doesn't matter anymore, and now that the "reward" for mining BTCs is about to halve- it's even more of a waste of time then it was before. You could have made money in the beginning if you were there, but if you weren't- it's not worth investing even a dollar into hardware to mine BTCs anymore. That train has long since departed.

BTC is basically just a currency now. Mining is vastly irrelevant and always will be, now that we've got FPGAs and ASICs flying around.

-AC

Re:Who cares, the mining game is over anyways.

[BlueBlade]

I don't know, at least for me, bitcoin mining is still paying part of my electricity bill. I live in Quebec and, like 90% of Quebecers, I use electricity to heat my house. That means that in winter, 100% of the heat generated by the card to compute bitcoins is used to heat the house. With the mining running, the house electric heaters need to start less often, so the mining is essentially free for me.

I'm using my 3 years old ATI 5870 card to mine the bitcoins, and I get about 4 bitcoins per month, which is roughly $45 at the current rates. I bought the card for gaming originally, and that's what it's still mainly used for. I only mine during the 6 months which require heating (november to april), so essentially, the bitcoin mining is free money. I made about $600 last year and I'll probably make $300 this year. For cases like mine, bitcoin mining is pure profit with no downsides at all.

Re:Who cares, the mining game is over anyways.

[norpy]

During a gold rush the only person who actually gets rich is the man selling shovels.

Re:Quick find all the people that care

[wmbetts]

There is a major difference between political anarchy and chaos. In political anarchy you still have order, but instead of a central government controlling everything it's done with voluntary contracts at the individual level. One of the core beliefs an anarchist has is personal freedom via volunteerism is the only real kind of freedom. There will still be a need for money in a society like that. It could be gold, silver, beads, goats, or whatever the two people doing business agree on.

If you or I believe that's a viable political structure is a different conversation.

Re:Bitcoins built-in failure

[molecular]

The main advantages of Bitcoin over other types of "real" money:

  * it's censorship resistant (can't be shut down, just like bittorrent)
  * it has low transaction costs and low barrier to entry (freedom of economic transaction)
  * it can be transmitted via the internet globally in short time (max 1 hour)
  * it's cheap and easy to secure against theft and loss

The additional advantages of Bitcoin over FIAT currencies:

  * the supply is limited
  * it's open source and not controlled by banking cartel or government, open to anyone

The disadvantages of Bitcoin:

  * its acceptance is very low, to say the least
  * it's hard to understand and therefore hard to trust
  * it offers an ideal playground for criminals and scammers
  * you can add your own criticism here