The world's largest cryptocurrency network underwent a major change on Monday as the number of new Bitcoins produced in each block fell by half.
After the Bitcoin halving process, which took place during the past hours, each block now contains only 6.25 new Bitcoins, which are worth about $ 55,000, and this is after they included 12.5 new Bitcoins worth about $ 110,000.
In other words, if someone who mined bitcoin had one coin in a month, he would now have it in two months.
The process that takes place every 4 years, this is the third time in the history of the digital currency in which the rewards for miners have been reduced.
This makes the mining process as a whole difficult, and makes it complicated for workers in the field of cryptocurrency miners, and accordingly they will focus on other digital currencies and reduce the investment of time and electricity costs in the Bitcoin mining process.
Lower mining yields mean lower energy consumption
To create a block, they make a list of all the transactions that have been introduced since the previous block was created, then compete against each other, performing millions of trillions of SHA-256 hash calculations every second, looking for a block that produces a hash less than an arbitrarily low value.
The winner gets a block reward (previously 12.5 BTC, now 6.25 BTC) plus any transaction fees included in the individual transactions.
Currently, transaction fees are much less than the block reward value of around 0.6 Bitcoin or $ 5,000 per block, so cutting the block reward in half means miners' income nearly halves overnight.
This sudden drop in mining rewards means that suddenly mining is less profitable, except for the significant increase in the price of Bitcoin, we can expect these to temporarily stop investing in new mining hardware for the next few months.
If mining becomes unprofitable enough, some miners may turn off less efficient mining machines because they do not generate enough digital currency to cover operating costs.
In the short term, the decrease in resources spent on mining should slow the rate of Bitcoin creation.
However, the network has an automated process to ensure Bitcoins are sourced at a fairly steady rate.
Every two weeks, the network changes the difficulty of the hash problem in order to keep the network producing around six blocks per hour.
If the network produces blocks very slowly then the network reduces the difficulty of the hash problem by increasing the range of hash values that are considered "winning".
If a network is producing more than six blocks per hour, the network does the opposite making the hash problem more difficult to slow down the rate at which the block is generated.
The result is that in the long run, the Bitcoin network always produces one block every 10 minutes, regardless of the hash power the network has.
Now every 10 minutes, 6.25 Bitcoins are being produced and this rate will continue for 4 years before it decreases significantly again in a new halving process.
Of course, miners want to make a profit and competition among miners keeps profit margins fairly constant in the long run.
So if Bitcoin mining revenues were halved, that would eventually translate into miners spending about half the same amount producing that digital currency.
Electricity is one of the biggest costs of mining Bitcoin, so cutting the rewards in half should ultimately reduce the amount of electricity consumed by mining it by a similar proportion.
In the interest of investors and speculators
Investors in the cryptocurrency market are betting that this change will have a very important impact on the Bitcoin price in the near future.
Pantera Capita believes that there is a 50% chance that the Bitcoin price will be $ 115,000 through August 2021.
Most experts agree that the prices of digital currencies will rebound in the coming period for this reason, and it is known that the movements of Bitcoin also have an impact on the movements of its competitors.
Bitcoin's rise in the coming period will positively affect Ripple, in addition to Bitcoin Cash , Ethereum , Litecoin and the rest of the digital currencies.
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