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Lecture slides:
Q1 According to the rules of the Bitcoin system, the block reward is cut in half every 210,000 blocks. Consider a different rule that the block reward becomes of the previous block reward every 105,000 blocks (with other rules unchanged), and assume that this different rule has been used since the advent of bitcoins. Will this change of the rule change the total number of bitcoins? If YES, what is the new total number of bitcoins? If NO, explain the reason. Incentives and Proof of Work Currently, the value of the block reward is 6.25 bitcoins. (The initial block reward is 50 bitcoins.) . Every 210,000 blocks (or approximately 4 years), the block reward is cut in half. . One block is added every 10 minutes approximately. 210,000 = 3.995 ~ 4 years 60 minutes x 24 hours x 365 days 10 minutes This implies that there are only a finite number of bitcoins, 21 million. 210,000 (50 + 25 + 12.5+ ...) 2 1 =210,000 x 50 x 1+ + 2 2 (1+k+(3) *+...) =210,000 x 50 x 2 = 21,000,000. 29 Incentives and Proof of Work The block reward was cut in half to 6.25 bitcoins on 11 May 2020. . Let n denote the number of cuts in half that is required after 11 May 2020 until the block reward drops below the smallest unit of bitcoin, 10-8, for the first time. Then we have n= inf{m N: 6.25 x (1/2)" mining cost. Here mining reward = block reward + transaction fees, and mining cost = hardware cost + operating costs (e.g., electricity) Dace Q1 According to the rules of the Bitcoin system, the block reward is cut in half every 210,000 blocks. Consider a different rule that the block reward becomes of the previous block reward every 105,000 blocks (with other rules unchanged), and assume that this different rule has been used since the advent of bitcoins. Will this change of the rule change the total number of bitcoins? If YES, what is the new total number of bitcoins? If NO, explain the reason. Incentives and Proof of Work Currently, the value of the block reward is 6.25 bitcoins. (The initial block reward is 50 bitcoins.) . Every 210,000 blocks (or approximately 4 years), the block reward is cut in half. . One block is added every 10 minutes approximately. 210,000 = 3.995 ~ 4 years 60 minutes x 24 hours x 365 days 10 minutes This implies that there are only a finite number of bitcoins, 21 million. 210,000 (50 + 25 + 12.5+ ...) 2 1 =210,000 x 50 x 1+ + 2 2 (1+k+(3) *+...) =210,000 x 50 x 2 = 21,000,000. 29 Incentives and Proof of Work The block reward was cut in half to 6.25 bitcoins on 11 May 2020. . Let n denote the number of cuts in half that is required after 11 May 2020 until the block reward drops below the smallest unit of bitcoin, 10-8, for the first time. Then we have n= inf{m N: 6.25 x (1/2)" mining cost. Here mining reward = block reward + transaction fees, and mining cost = hardware cost + operating costs (e.g., electricity) Dace
