[FoRK] Rewards set to halve for digital money miners
eugen at leitl.org
Thu Nov 29 03:37:33 PST 2012
Rewards set to halve for digital money miners
Miner's helmet Bitcoin "miners" generate the coins by completing work on a
People trying to profit via the bitcoin electronic currency will soon have to
work harder to mint the digital coins.
Safeguards built into the bitcoin software are about to be triggered as the
number of bitcoins in circulation hits a key milestone.
This means bitcoin "miners" will have to work twice as hard to be rewarded
with the same number of coins.
The change comes as competition to create the coins gets more intense with
the release of custom mining chips.
Since the creation of the bitcoin network in early 2009, bitcoins have grown
to become a very widely used digital currency. An increasing number of online
shops and businesses accept bitcoins as payments and currently each bitcoin
is worth about £8.
As a digital currency, bitcoins are not issued by a central bank or national
mint. Instead they are created by the system's network when a specific amount
of computer work, known as a "block" has been completed. Fifty bitcoins are
released when that block is done and the work, which involves solving a hard
mathematical problem, is completed.
The protocol that defines this block-to-coin ratio reduces the reward given
for finding each block every time 210,000 blocks have been found. According
to statistics gathered about the bitcoin network, the 210,000 figure looks
set to be passed on 28 November. Then, instead of getting 50 bitcoins per
block, miners will get only 25.
"The main reason to do this is to control inflation," said Vitalik Buterin, a
journalist at Bitcoin Magazine. Controlling the rate at which coins were
created, he said, meant there would never be a surge or shortfall in the
number of bitcoins in circulation, either one of which could rapidly change
the value of each coin.
It addition, he said, it was a hedge against technological innovation. In the
early days of bitcoins, many people used desktop computers to do the hard
sums. Then they started to use banks of graphics cards that could do the
maths very quickly to speed up the rate at which blocks of work were
Mr Buterin said some miners were now using even more specialised hardware to
do the mathematical work and firms were starting to produce custom-made chips
that stepped up the pace of work even more.
However, he said, the creators of bitcoins had foreseen these changes and
built in controls to keep the numbers of blocks completed relatively
"The protocol always calibrates difficulty to make up for increased mining
power," he told the BBC, "so the speed at which people are finding blocks
isn't going to go up by much no matter what."
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