Bitcoin mining will become less profitable, due to the halving process. What should the community expect?

By Daniel Zo Bitcoin, Mining, Halving

The Bitcoin network is built in such a way to meet supply and demand, while also encouraging growth of the digital currency’s value. Because of this, once every couple of years, a process known as halving takes place, meant to reduce the number of bitcoin that are mined.

Halving hasn’t received much media attention, considering the fact that the last one took place when bitcoin was still at its beginning, and not many people were involved with the cryptocurrency. However, the expected date for this change to happen once again is the 11th of July 2016, less than three months away. The initial impact of the act will be to cut down by half the reward that miners receive for verifying crypto-transactions that take place on the blockchain. Basically, their wages will be cut into half- unless the value of bitcoin increases.

Bitcoin mining

At this moment in time, the bitcoin community is divided into two sides. The first one believes that halving will make the price skyrocket, whereas the other half believes that this process will represent the beginning of bitcoin’s end.

To put things better into perspective, conventional currencies always have a central bank, which is responsible for printing out more money, and hence controlling the supply. If more money is needed, than more will be printed out. Things stand quite differently with bitcoin. Satoshi’s protocol is written in such a way that no more bitcoin will be offered as reward for the miners for each block verified, once the number of 21 million bitcoin is reached. Currently, we’re halfway there, but to lengthen the supply of the coin for the years to come, the halving process is required. However, if bitcoin does end up being successful, the event will only encourage its growth, thus offering miners a steady profit that they can base their work on.

Regardless of this, it’s also important to take a look at the other side of the spectrum. In case bitcoin’s value does not increase significantly, then miners from all around the world will likely quit their work, considering the fact that it has become unprofitable. Either this, or the transaction fees will skyrocket to compensate for the missing coins. Another risk that halving presents is that bitcoin may become centralised, as only big, organized mining groups will still be able to make a profit, thus throwing the small fish out of the pond. It’s also important to point out the fact that Litecoin, a popular altcoin, has recently had its halving process, yet its value remained unchanged. Unfortunately, its influence on the market is too low to get an understanding of what should be expected of bitcoin this summer.

Based on everything that has been outlined so far, no one currently knows what will happen for sure. However, this summer’s event is definitely one of the most important in bitcoin’s timeline, as it’ll be the judge of whether the digital currency will have a bright future or not. What do you personally think? Will bitcoin’s value remain unchanged or skyrocket? Let us know your thoughts in the comment section below.