Bitcoin has halved this week, FYI...
Not that long ago, the word “Bitcoin” seemingly took over every conversation on news channels and social networks. It even became a central focus for Davos back in 2017. It was definitely a hot topic and consumed more column inches than you could throw a stick at. Fast-forward to this week when we’ve witnessed a milestone in Bitcoins history, it’s hardly made second-page news.
At 9:23 May 11th, the 630,000th block was generated - meaning it triggered the 3rd halving in Bitcoins' history.
Personally, I’ve been a Bitcoin investor and I’ve built and owned a number of mining rigs too so, I have a slightly different view on the currency than your average.
For those unfamiliar with the mechanics of Bitcoin, it was specifically designed as a de-centralised currency that relies on the computing power of individuals throughout the globe instead of one central bank or organisation.
That means it’s wholly reliant on people contributing computing power to secure the Bitcoin network. To maintain that network of computing power, Bitcoin miners receive a reward for each Bitcoin block that’s mined. Bitcoin is designed to cut the reward of solving each block by half every 210,000 blocks solved. Overnight, miners went from earning 12 Bitcoins per block to 6.5. Devastating!
The main mining first being Bitmain, Ebang, Strongu, Innosilicon, Microbt, and Canaan. There are a few other manufacturers, but the firms are not nearly as sizable as these six businesses. Just recently, the company Ebang filed for a $100 million initial public offering (IPO) in the U.S. and the company will await a decision from the SEC.
In the run-up to the halving, mining firms were feverishly whirring away to draw as much profit as possible, but there was speculation over whether it would cause Bitcoin to crash and see investors run for the hills, but the past few days it has in fact flattened and remain (relatively) steady.
"The recent much-hyped halving, while largely psychological in impact, could create a catalyst drawing new players into the market and contributing to the rise in the value of bitcoin," said Gavin Smith, chief executive of Hong Kong-based bitcoin and cryptocurrency exchange and hedge fund Panxora, adding he believes bitcoin is at "the start of a multi-year bull phase" though there could be "a bumpy road ahead."
That’s all well and good, but not if there are no miners mining! Mining is a highly lucrative industry IF the currency retains a high value, but the value of Bitcoin dropped dramatically in Dec 2017 forcing a lot of miners to hang up their machines. With the reward now being halved to 6.5 Bitcoins, coupled with the slump in Bitcoin value, this could see another wave of miners retracting from the network.
Oh, also, Bitcoin's mining difficulty is expected to increase by 4.9% in the next week!
I mentioned above that I’ve run mining rigs – I’ve built a dedicated GPU mining farm right through to running ASIC mining rigs. From a miner’s perspective, I can’t see how it’s going to be sustainable to continue running the network and solving blocks. Unless the value of Bitcoin moves back up to the record highs of 2017, I can’t see how mining for 6.5 bitcoin per block with increased difficulty and falling value can be sustainable. Surely, miners will have to stop mining?
- Without a centralised computing power for currency, what happens when all Farms stop mining due to a lack of profits?
- Will we see a huge spike in value as Gavin Smith predicts?
- Could Bitcoin ever grind to a halt due to no computing power?
- Is Bitcoin even more volatile now than it ever was?
- Have the big 6 mining companies burnt out despite IPO applications?
I for one will be watching how this plays out, even if it doesn’t get the news coverage it once had.