What is the Bitcoin block reward?
We all know that Bitcoin uses a decentralized digital ledger called the blockchain to record and verify all of its transactions. The blockchain is actually a sequence of blocks, each being a virtual container storing a group of bitcoin transactions. These blocks are what the Bitcoin miners are constantly working to create. The mining machines worldwide are constantly making cryptographic calculations to securely confirm new transactions in a block. Once the correct calculation is found for a new block, it is mined successfully and confirmed by the whole Bitcoin network as being valid, with no double spends or other faulty transactions. A new block gets confirmed roughly once every 10 minutes, which is about 144 blocks every day.
Bitcoin transactions are not free. These transactions fees are bundled together in each block, and paid out to the miners. This is called the block reward -- the reward for “finding” the cryptographic solution that confirms the block. What’s most interesting is that Bitcoin also uses this same block reward mechanism to distribute its full supply of 21 million bitcoins. The Bitcoin digital currency system is well known for having an upper limit of 21 million bitcoins. But the catch is that not all 21 million bitcoins are put in circulation at the beginning. Rather, these bitcoins are sent into general circulation with each passing block confirmation. This bitcoin supply injection is relatively fast at first, and then it slows down considerably in the years that follow, ultimately slowing down to just a small trickle.
When Bitcoin first launched in January of 2009, the block reward was 50 bitcoins, so with 144 blocks in a day, that amounted to 7,200 new bitcoins released into the system every day. At the end of that first year, total bitcoin supply was just 2.6 million. That continued for roughly 4 years, after which the global Bitcoin system went through a block reward halving event, which brought the block reward down to 25 bitcoins, yielding a daily new supply of just 3,600 bitcoins. The first block halving event happened on November 28, 2012. By then, total bitcoins in circulation already reached 10.5 million.
The block reward gets cut in half roughly every 4 years. The second block halving took place on July 9, 2016, which means the block reward was cut from 25to 12.5 bitcoins per block, yielding just 1,800 new bitcoins each day. Just this year, we experienced our third block halving event on May 11, 2020, which brought the block reward down to 6.25 bitcoins, yielding just 900 new bitcoins each day. In total, we now have about 18.5 million bitcoins in circulation. All of that was from these bitcoin block rewards, 50 bitcoins per block at first, down to 25, 12.5, and now 6.25 bitcoins per block. We’ve come a long way! So there’s only roughly 2.5 million more bitcoin left to be added to the system before reaching a hard limit of 21 million bitcoins.
With these successive block halvings roughly every four years, the Bitcoin network consensus ensures that the system does not end up with more than 21 million bitcoins. In a hundred years, the block reward will be infinitesimal, just a very small fraction of a full bitcoin, for every new block. For the next 3+ years, the block reward will remain at 6.25 bitcoins, until about early 2024, which is when the fourth block halving will take place. When that happens, the block reward will automatically go down to 3.125 bitcoins, yielding just 450 new bitcoins put into circulation per day. And that’s what’s going to be shared by the whole Bitcoin mining community in the whole world! (As a side note, this is why I’m so bullish on Bitcoin price: By 2024, if the global mining community spent USD $50+ million in mining each day, the price would easily exceed USD $100,000.)
What about today? You should savour the fact that the block reward is a gigantic 6.25 bitcoins. In about 11 years time, in 2031, the block reward will go down to below one bitcoin for the first time, to just 0.78125 bitcoin per block. Wow!
Now to the fun part: If you want a piece of Bitcoin history that you can actually hold in your hand today, you can purchase a physical Bitcoin Block from Ballet. It’s a physical Bitcoin collectible, and once you receive it in hand, you’ll get a full bitcoin block reward mined directly into it from our mining pool partner, along with all of the natural transaction fees included in that block. This Bitcoin Block is truly a one-of-a-kind collectible, assigned its own block height number by the Bitcoin blockchain, with its unique block reward amount. No two blocks are alike! And today, these Bitcoin Blocks will have the full 6.25+ BTC block reward. Yes, they’re VERY EXPENSIVE, so it’s only a collectible for the true Bitcoin fan, the true HODLer. (And they’re only going to get more valuable as time goes on!)
I think that without a doubt, this is the most awesome Bitcoin collectible ever. In fact, I started making these back when I ran BTCC, where we launched a line of physical Bitcoin collectibles called BTCC Mint. In 2016, we made Bitcoin Blocks both before and after the second block halving, so those blocks contained 25+ and 12.5+ bitcoins. A HUGE amount by today’s standards.
Yes, you can actually hold a physical Bitcoin Block in your hand today: