Bitcoin halving happens once every four years and successfully helps lift the Bitcoin price by providing scarcity and increased demand. The upcoming halving, which is supposed to happen around 20 April, will be the 4th halving event of Bitcoin after the successful history of the past three.
In this blog, let us discuss how Bitcoin Halving works and how miners will face billions in losses.
How Does Bitcoin Halving Work?
Bitcoin Halving is mandated to happen every 210,000 block formation, which takes almost four years. This four-year event is one of the most hyped events of the cryptocurrency market, as the Bitcoin mining award gets sliced in half, leading to Bitcoin scarcity and increased demand, eventually lifting the Bitcoin price.
Bitcoin halving plays a major role in building the demand for Bitcoin and maintaining the inflation around it. To do so, the mining rewards have to be compromised. For instance, in the last halving event of May 2020, the block reward was reduced from 12.5 BTC to 6.25 BTC.
So, the upcoming halving will reduce the block reward from 6.25 BTC to 3.62 BTC. However, the miner’s profits also get reduced, impacting their earnings on their Bitcoin mining activities.
Bitcoin Halving Will Snatch $10 Billion In Rewards From Miners
On average, a miner receives 900 BTC in reward daily, but after the halving incident, the rewards will be 450 BTC, which comes around a loss of at least $10 Billion in a year. This huge amount of money heavily impacts the miners. Because of this, a shift of miners from Bitcoin to other PoW networks might happen to cover the losses.
Though it is accepted that the Bitcoin halving positively impacts the crypto market and a bull run follows the halving, the mining industry gets heavily affected by this event. The miners ought to elevate their technological expenses to afford better equipment to cover this loss. And this happens every four years, which brings financial constraints on miners.
Mining organizations like Marathon Digital Holdings and Clean Spark take over their rivals or smaller miners to survive in these highly competitive markets. The organizations that succeed in doing so can make the best of the post-halving bullish situations. However, a few end up losing to technological and economic constraints.
In an interview, Ben Smith, the CEO of Immersion BTC, was questioned about the post-halving difficulties. To which he said.
“The biggest difficulty post-halving will be the reduction in daily revenue. The Bitcoin price needs to rise to offset the price of energy and other overhead. I have confidence that the global hash rate will decrease over a short-term post-halving halving, which should make the miners that have the ability to stay on more profitable. Adding Hiveon helps me ensure that I will be able to keep my units running profitably post-halving.”
Conclusion
The current market fall is not the only drawback of the Bitcoin halving event. Two other factors also add to the total, including the loss of earnings and additional budgeting requirements. Regardless, the overall profits of these Bitcoin halving events end up compensating for these losses.
Read More 5 Crypto To Sell Before Bitcoin Halving Event
The post Bitcoin Halving to Hit Miners With Billions In Loses; Here’s Why appeared first on CoinGape.
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