A two-fold reduction in the miner's reward for a mined block is a rare event. Many became interested in the field of digital money in 2017, so this halving is the first for them. Here's everything you need to know about it
On May 11, at about 22:30 Moscow time, at block 630 00, the bitcoin mining reward was halved: from 12.5 to 6.25 BTC. The next halving will take place on block 840,000, which will be mined around 2024. After the 2017 hype, when the price of BTC reached an all-time high of $ 20,000, a lot more people became interested in digital money. And for many of them halving happened for the first time, so there are questions that require a simple answer.
What is halving?
This is a two-fold reduction in the reward for the mined block. Initially, miners received 50 BTC, on November 28, 2012 this amount decreased to 25 BTC, on July 9, 2016 – to 12.5 BTC. Yesterday, May 11, 2020, it dropped to 6.25 BTC. Now the profitability of mining cryptocurrency has become 50% lower.
Why do you need halving?
Satoshi Nakamoto, by reducing the miners' reward for the mined block, made the emission of the cryptocurrency controlled. It is believed that over time, bitcoin will be mined more and more costly. New coins will be released to the market more and more slowly. This will contain cryptocurrency inflation. Now that central banks in various countries are “printing” national currencies to help the economy hit by the coronavirus pandemic, digital money proponents are calling the limited emission of bitcoin a big advantage.
What will happen to miners after halving?
After the reward for the mined block is reduced, the profitability of mining drops by half. At the end of April, co-founder and managing partner of F2Pool (the pool that mined the last block before the 2020 halving) Wang Chun suggested that the less efficient players would be taken over by larger companies. This opinion is shared by the vice-president of Poolin Alejandro de la Torre.
At the same time, large companies are ready for halving if they have new equipment and access to cheap electricity. According to the co-founder of F2Pool, any farm that spends no more than $ 3500 to mine one BTC will survive.
Will Bitcoin definitely rise in price after halving?
After previous halvings, the value of the first cryptocurrency has increased many times over. For example, after the first reduction in the miner's reward, the price of the coin increased from $ 11 to $ 1100. After the second – from $ 600 to $ 20,000. However, now no one guarantees that the bitcoin rate will again show impressive growth.
How the value of bitcoin changed after the first and second halvings (Photo: Bitcoinblockhalf)
Many experts, including Fundstrat co-founder Tom Lee and billionaire and Galaxy Digital CEO Mike Novogratz, call halving one of the drivers of the future growth in the value of the first cryptocurrency. But there is an opinion that the reduction in the miners' reward for the mined block is already "in price", which means that after the event the value of the asset may decrease. For example, Litecoin creator Charlie Lee and Bitcoin Cash supporter Roger Ver talked about this.