The Bitcoin blockchain just underwent it's 3rd block reward halving last week, it is somewhat an important event in the cryptocurrency space since it comes around roughly every 4 years. When Bitcoin blocks are mined, the miner of the valid block receives a certain amount of Bitcoins as the block reward for mining that specific block. This block reward is newly generated Bitcoin that is created every time a new block is mined and this mechanism allows for new coins to come into circulation.
What is special about Bitcoin is that this block reward is not fixed but rather gets halved at regular intervals. This block reward reduction takes place every 210,000 blocks which approximately comes out to 4 years taking into account the average time of 10 minutes for each block to be mined.
This is what the supply curve for Bitcoin looks like. The first 210k blocks had a block reward of 50 BTC. After the 3rd halving last week on May 11th 2020 this block reward has come down to 6.25 BTC. This is actually the reason why the total number of Bitcoins that can ever be produced is capped at a 21 million. After 64 halvings the block reward is 0 BTC.
We can take a look at the bitcoin source code to see where and how exactly the halving takes place. You can see this for yourself in the source code hosted on the official bitcoin repository over at github.
CAmount GetBlockSubsidy(int nHeight, const Consensus::Params& consensusParams)
{
int halvings = nHeight / consensusParams.nSubsidyHalvingInterval;
// Force block reward to zero when right shift is undefined.
if (halvings >= 64)
return 0;
CAmount nSubsidy = 50 * COIN;
// Subsidy is cut in half every 210,000 blocks which will occur approximately every 4 years.
nSubsidy >>= halvings;
return nSubsidy;
}
On line 6, if (halvings >= 64) checks for the number of halvings, from the 64th halving the reward is 0.
The 3rd last line, nSubsidy >>= halvings; uses the right shift bitwise operator >>. This effectively divides the number nSubsidy by 2 for each halving. If the number of halvings is 3, then the nSubsidy is divided by 2 three times effectively dividing 50 by 8 yielding the current block reward of 6.25 BTC.
Miners can embed an arbitrary string in the bitcoin blocks. Remember the message by Satoshi in the genesis block? — “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. F2Pool, a mining pool that mined block number 629999 left a message that alluded to Bitcoin's origins. It's possible to see this message on a block explorer and notice the reward reduction from 12.5 to 6.25BTC:
NYTimes 09/Apr/2020 With $2.3T Injection, Fed's Plan Far Exceeds 2008 Rescue
Bitcoin was born from the 2008 financial crisis, as an alternative to the current economic system. Now that the world is in the midst of a new crisis this message references the central bank money printing.
