If you were thinking about mining bitcoin for cash, be aware that your reward might be less than expected.
On Saturday, the reward for mining bitcoin was halved, Reuters reports. Instead of getting 25 bitcoins every 10 minutes for mining the cryptocurrency, miners will now only be able to get 12.5 every 10 minutes, a major hit to the profits enjoyed by mining companies and individual miners around the world.
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Bitcoin was developed in 2009 as a cryptocurrency allowing people to engage in free trade without the prying eyes of government. The technology has come under fire from critics who say it's an easy way for criminals to buy and sell illegal goods; supporters say it offers them an opportunity to back away from traditional currency. Some e-commerce sites, including Overstock.com, have even started accepting bitcoin as a form of payment.
However, since bitcoin is a real currency with a real exchange rate, it needs people behind it to manage it. In fact, bitcoin is grouped in so-called "blocks" and recorded to a public digital ledger called blockchain. Each day, miners record transactions to the ledger and receive bitcoins for each block they record.
In 2009, miners would receive a 50-bitcoin reward for entering blocks into the ledger. However, every four years, the rewards are halved due to market demands and other economic concerns. So, in November 2012, miners received a 25-bitcoin reward for entering blocks into the ledger, and now we're at 12.5.
While that might not sound so great for miners, and indeed, many will initially see their profits halved due to the change, history has shown that it's not nearly as bad as some might think. As the site The Halvening explains, bitcoin grew in value after the first halvening and eventually skyrocketed from a $13 exchange rate to $260 in just four months in 2013.
While it's impossible to know for sure what might happen next—bitcoin is, if anything, an unpredictable currency—it is possible that it might rally and make up lost profits.
Regardless, mining is still a potentially lucrative business. As of this writing, a single bitcoin is valued at $650. Even at 12.5 bitcoins, miners are getting $8,125 for their work. And if the price goes up and they rack up more bitcoins, their wealth will rise with it.