Is Bitcoin Halving?

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Is Bitcoin Halving?

Bitcoin has a maximum inventory of 21 million coins and its network is guaranteed by the miners. Miners are special hardware that uses a consensus mechanism called "proof of work" to verify each block of bitcoin transactions. Miners are rewarded when they 'find' blocks with newly created bitcoin. This is called a block prize and this is how the new bitcoin is released into the system.

New blocks filled with transactions are added to the Bitcoin blockchain about every 10 minutes and miners who verify each block receive a block prize. The current block prize is 12.5 bitcoin per block. On average, 144 blocks are mined per day. 12.5 new bitcoins are generated with each block. This gives an estimate of around 1,800 new bitcoins that are mined per day.

The number of new bitcoins made through block prizes is reduced by half every 210,000 blocks, about four years. This is known as Bitcoin Reducing. In 2009, the prize for mining Bitcoin began at 50 BTC per block. On November 28, 2012, the first half of bitcoin occurred to reduce mining prizes to 25 BTC. On July 9, 2016, the second half brought mining prizes down to 12.5 BTC. The next halve will be the third half, which is expected to occur on May 4, 2020. At that time the prize block of 12.5 bitcoin will be reduced by half, to 6.25 bitcoin.

Every half reduce the level of new Bitcoin that goes into supply until no more new Bitcoins are created at all in 2140. By 2140, half to 64 and the last occurred and no new Bitcoin will be made. This process is coded in the Bitcoin code by its creator, Satoshi Nakamoto. This mechanism reduces the total supply over time.

How will half affect miners?

The main source of income for a miner is the block gift you get when you 'find' a block. The amount of Bitcoin mined on the block can then be sold with fiat currency. This means that the actual profitability of a miner depends very much on the price of Bitcoin and how much Bitcoin is mined. The mining process has several costs for miners, such as hardware costs and electricity costs. So, when half occurs miners will get 50% less Bitcoin per block mined, while the costs remain the same. So to compensate for this and maintain the same profitability, the price of Bitcoin needs to be doubled.

This is most visible when looking at the minimum price of Bitcoin required for mining continuity - the price for a miner to return all costs including the purchase of a machine. This minimum price will now increase significantly, by itself it doesn't have to be a bad thing, but it is something that needs to be taken into account if the price of Bitcoin goes down. If the price of Bitcoin falls below the minimum price for a miner to be profitable the miner will turn off the engine, and when that happens, network difficulties will go down.

According to the law of supply and demand, a scarcity of Bitcoin supply will cause an increase in Bitcoin demand, which leads to an increase in prices. But this is only in theory, and no one can predict when this will happen. What miners can do is stay ahead of the problem and find ways to use mining hardware that is most efficient and has low electricity prices.

Elite Mining takes into account these future events by ensuring a good offer for equipment and very low electricity costs. This helps keep the minimum price of Bitcoin that EMI needs is very low, making us very competitive.