- With the conclusion of the fourth halving event for Bitcoin, a new era for the network has begun.
- The block subsidy payment for Bitcoin miners is now only 3.125 BTC instead than 6.25 BTC.
With the completion of the most recent halving of Bitcoin BTC +1.03%, miners’ block subsidy incentives have decreased from 6.25 BTC to 3.125 BTC.
At block height 840,000, Bitcoin saw its fourth halving, which marked the start of a new era for the network. Many in the community had hoped that the halving would occur on April 2o, however this did not happen for the US market because miners seemed to increase their hash rate on the network before the subsidy was dropped.
It is planned for Bitcoin to automatically halve every 210,000 blocks, or roughly every four years. Following a halving event, miners receive 50% less in bitcoins as a subsidy payment for each block of transactions they mine and add to the blockchain.
Prior to today, Bitcoin had three halving events: in 2012, the block subsidy inflation was reduced from 50 BTC to 25 BTC; in 2016, the amount was reduced to 12.5 BTC; and on May 11, 2020, there was a final halving event that resulted in 6.25 BTC.
Miners will now produce, on average, 450 BTC per day instead of 900 BTC due to this most recent halving. In the long run, there will only be 21 million bitcoins in use.
The halving of bitcoin will continue until the last bitcoin is mined, which is expected to happen around 2140. After then, the only revenue that miners can make is from transaction fees.
Today’s half, which is sometimes called “the halvening,” is possibly the biggest for a number of reasons, according to Thomas Perfumo, Head of Strategy at Kraken.
Firstly, about ninety-five percent of all bitcoins will have been mined by April 2024. Additionally, he stated that the annualized growth of the bitcoin supply will soon drop to less than 1% for the first time.
Although miner earnings have increased this year due to the growth in the price of bitcoin, it is unclear how much of an impact the halving will have on less productive mining operations and, consequently, the network’s overall metrics after the subsidy is reduced.
In the past, the Bitcoin network has shown resilient in the face of similar difficulties. Reduced miner participation might be lessened by improvements in mining equipment and tactics, as well as possible changes in mining difficulty, according to Teng. “In addition, some miners might decide to move to mining altcoins or look into different ways to make money in the cryptocurrency space, which could help keep the overall mining ecosystem in balance.”
The lower block rewards are expected to put more strain on some miners, which might drive out less productive businesses from the market. According to Bitfinex Head of Derivatives Jag Kooner, “this could lead to greater centralization of mining power among larger, more financially robust entities.”
However, this shift presents an opportunity for innovation and increased productivity for the sector. In order to maintain profitability, miners might explore alternative regions with more affordable energy sources or invest in more sophisticated mining apparatus.
Miners shift their focus to new activities in the Bitcoin ecosystem when transaction fees gain significance.
In the past, transaction fees have made up a much smaller portion of the Bitcoin miners’ income than the block subsidy. However, transaction fees will become more crucial for Bitcoin miners in the future due to the halving of the subsidy value and the renewed activity on the Bitcoin blockchain this cycle, especially from Ordinals-related activity.
According to Binance CEO Teng, this year’s halving is special since it coincides with a number of other noteworthy developments in the Bitcoin and larger cryptocurrency ecosystem. “Another significant trend in cryptocurrency today is the explosion of Layer 2 and DeFi activity on the Bitcoin network, driven by the popularity of the Ordinals protocol and Bitcoin inscriptions. This is in addition to the ETF breakthrough, which has sparked institutional interest and engagement.
This halving period, according to co-founder Alexei Zamyatin of BOB, a hybrid Layer 2 solution for Bitcoin, will show how miners and Layer 2 projects are working together more and more, with miners looking for ways to make more money and Layer 2s trying to take advantage of Bitcoin’s security.
As each halving reduces their incentives, miners will be motivated to bootstrap new Layer 2 Bitcoin enterprises and will continue to seek out new sources of income, according to Zamyatin. The more successful use cases developed on Bitcoin, the more money miners can make.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
