The third Bitcoin Halving event is due in a couple of weeks, and the entire crypto space is wondering about the impact on this halving in the mining process of bitcoin. In this article, I would like to explain the possible implications of bitcoin halving 2020 on the mining activities.
The Bitcoin halving occurs mining every 210,000 blocks, and consequently, it reduces the BTC reward offered to miners for verifying each block by half. Post Bitcoin Halving 2020, the reward will reduce from current 12.5 BTC to 6.25 BTC. This drastic reduction in rewards will have a different impact on the ongoing mining activities.
Hike in Average Fees
Apart from getting BTC as a reward for solving cryptographic puzzles, the miners also receive a part of fees applied on the transactions. The halving event will eliminate many short players out of the market as they won’t be able to make profitable mining using the Old mining rigs. It is expected that after the halving event, the expenses on mining one bitcoin will outrun its current average price. Therefore, to sustain profitable mining and ensure smooth transactions processing, a short term hike in the average fees is expected. It will help avoid congestion in the Bitcoin network and support the miners.
Decline in Network Hashrate
Since the last bitcoin halving event in 2016 and decline in Bitcoin price after the rally in 2017-2018, the miner’s profit margin has been significantly reduced. After this halving event, the miners with old S9s machines will be forced to either opt for a more efficient machine or shut down the mining rigs. As the change in reward from 12.5 BTC to 6.5 BTC will make the mining process using old machines an unprofitable business This is primarily impacting the bitcoin network health, and the hashrate may considerably decrease for a while. The decrease hashrate further impact the average block interval as shutting down of mining rigs will directly hamper the rate of block-creation.
Sudden increase in Average Transactions Fee
Considering the decline in hasrate and shortage of miners, the bitcoin network may see a significant surge in congestion and increased time in completing transactions. This will lead to a hike in average price to support the system by bridging the gap left after the reduction in BTC reward. The short term hike in Average transaction fee would continue until te bitcoin network achieves an equilibrium by restoring a healthy hashrate.
The Bitcoin Halving 2020 is a much-awaited event in the crypto sphere. While the traders are hodling the bitcoin with a high expectation of spike in BTC price after halving, the miners are looking for the alternatives and investment in lastest efficient miners rigs to sustain the mining process even after the reduction in reward by 50%. Like the previous two halving events, this one also has some positive and negative impact on the overall bitcoin eco-system. We expect the changes will impact the system for the short term until the miners find stability and way to continue profitable mining.
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