Opinion: Bitcoin halving is actually a reward for efficient miners

Bitcoin’s block reward halving is a reminder of its scarcity. Although Bitcoin has faced two halving events in the past, the third halving is about to take place in just over a month.

2020 is the year of the halving, leading most investors to expect a surge in prices, but the recent price crash has increased concerns not only among investors but also among the Bitcoin miner community.

Marco Streng, CEO of Genesis Mining, elaborated on how the upcoming halving will affect the mining community in the latest episode of the Crypto Conversation podcast.

He stressed that the upcoming block reward halving is not an “unpredictable event for those who are serious about mining,” Streng said, commenting on the global uncertainty caused by the recent cryptocurrency price crash, the COVID-19 pandemic, and even events like the halving.

“I think the halving is coming and that will clear out some of the excess mining space…Obviously, that will lead to more consolidation, which will really incentivize miners and will really drive miners to innovate and continue to increase their mining capacity and improve their efficiency,” Streng said.

When asked if he agreed that Bitcoin mining is a “rat race with attrition,” Streng pointed out the inherent competitiveness of the Bitcoin mining ecosystem, saying, “In mining, once you build the machines and get them out there, every hour counts. You want to get them connected to the network, you want to get them mining, but it’s always unsettling and the fact is that ultimately you never get used to it.”

A recent report from BitMEX analyzed the impact of the upcoming halving event and predicted that after the halving, the network’s hash rate could drop by 29% in one possible scenario.

“Excluding the impact of transaction fees, the impact on miners should be almost the same as a sudden 50% drop in the price of Bitcoin. One could argue that a sudden 50% drop in the price of Bitcoin means that the size of the mining industry should drop by 50%. This is true in terms of industry revenue, which should drop by about 50% after the halving, all other things being equal. Therefore, this could be a very challenging period for the entire industry.”

In a little over a month, Bitcoin’s hash rate has dropped from 127E to 109E, raising questions about the fate of Bitcoin after the halving.

In this context, Streng stressed the need for miners to “get ahead of the downward curve,” adding that efficient miners could instead take advantage of the halving to increase their competitiveness.

“Some miners are going to be in the red, they’re going to be in non-profit operations, so they’re going to have to exit, and when they exit, the hash rate is going to go down, the difficulty is going to go down. And those who remain in the market or in the mining farms, they have a higher market share and have the opportunity to make up for the shortcomings of their own mining.”

As the saying goes, "Misfortunes often come with blessings, and blessings often come with misfortunes." Probably every halving is a test for Bitcoin and a reshuffle of the industry.

The original text comes from Ambcrypto and was compiled by the BluemountainLabs team with additions and deletions. The English copyright belongs to the original author. Please contact the translator for Chinese reprint.