Bitcoin Halving – do we expect a blessing or a catastrophe? Various voices have been raised about this.
With the upcoming halving of the Mining Reward, many Bitcoin enthusiasts have the hope that this will take Bitcoin’s price to new heights.
But there are also worried voices by Bitcoin trader
A Miner has expressed serious concern that this Bitcoin Halving will trigger a series of events that will inevitably lead to a hard fork. Chandler Guo is the founder of Bitbank, a Chinese company responsible for the world’s largest mining operations. On average, BW is responsible for 10% of the total Hashrate. If Bitcoin’s price does not rise dramatically before or immediately after Bitcoin trader halving, Guo fears that too much hashrate will be lost due to unprofitable mining, which would make it virtually impossible to confirm a transaction by the Bitcoin trader.
“If the price doesn’t rise rapidly by a factor of two, it will lead to the shutdown of many older machines.”
Bitcoin Halving is an event that occurs roughly every four years for the crypto trader
The new generation of Bitcoin is halved. In 2009, when Bitcoin was invented by Satoshi Nakamoto, the crypto trader was rewarded at 50 BTC. About four years later, this reward dropped to 25 BTC. This guarantees that Bitcoin is limited. However, the sudden reduction of the reward can cause problems for miners by reducing the margin. According to Guo, miners using less efficient crypto trader hardware will be forced to shut down their machines.
“The 300 Petahash machines and older models will be taken off the grid immediately – machines like the Avalon A3 or Bitminer S3 will simply no longer be worth it, at best they will receive their own electricity costs as a reward.
Difficulty forces Hardfork
The greater the hashing power a Miner has, the greater the probability that he will make a profit on a regular basis.
To prevent this from becoming a self-runner, the Bitcoin protocol specifies that the difficulty of the miner, the difficulty, is calculated every 2916 blocks on the basis of the hashrate of the network. In the last year this difficulty has increased extremely with the amount of powerful hardware in the network.
This time set in the protocol to recalculate the difficulty is the reason for Guo’s worries. Taking a significant part of the hashing power from the system would lead to a dramatic slowdown of the network – which in turn would result in a long delay in recalculating the difficulty.
“Without adjusting the difficulty, a dramatic reduction in the hashrate will not create a new block – so if Bitcoin’s price does not go up after Bitcoin halving, but even drops, the blockchain will come to a standstill.
In the worst case, this would lead to an extreme loss of trust in Bitcoin, which could lead to a digital equivalent of the bank run: People would try to trade in their Bitcoin as quickly as possible, pushing the price down. The falling Bitcoin price could in turn lead to a further exit of other miners from the net and thus to a vicious circle.
According to Guo it will need a hard fork to reset this difficulty.
“The hard fork will come and the price of Bitcoin will fall again,” says Guo.
Bitcoin Halving – but hotter cooked than eaten?
Not everyone sees the future as pessimistic as Guo. In the eyes of the optimists, this Bitcoin Halving will also end positively – after all, Bitcoin has gone through the same thing before without suffering any damage.
Eric Lombrozo, one of the contributors to the Bitcoin Core dev team and founder of Ciphrex said:
“In my opinion, the Bitcoin Halving will not have the dramatic impact some people think it has. We’ve had Bitcoin halving before and have experienced abrupt price falls in the Bitcoin before – in both cases this has resulted in less profit for the miners. There was no dramatic reduction in the hashrate in either case.”
People like Lombrozo, who don’t link the end of Bitcoin or the arrival of a hard fork to the Bitcoin halving, claim that the miners have enough financial reserves to cope with an abrupt drop in profits and bridge the time when the market wants to set a new value for Bitcoin.
Bobby Lee, CEO of BTCC, agrees with Guo that there will be a decline in the Hashrate, but does not think it will be as dramatic as Guo fears.
“Probably the hash rate will drop by five to ten percent, in the worst case perhaps up to 30%.