After being at the heart of debates in recent months, one of the major events of the Bitcoin network will occur today: it is the day of halving . For many, this day sounds like the certainty that the price will increase. For others, such as miners, it is the promise of a loss of profitability of their activity. Let's see the ins and outs of this event!What is Halving?
First of all, let's fix the basics. Since Bitcoin is often compared to gold, halving can take its bases in this comparison. Indeed, just like gold, there is a limited quantity of bitcoins to mine - 21 million in all - and the more we advance in time, the more the total quantity decreases .
To simulate this rarity by computer, Bitcoin is fitted with a mechanism to reduce the mining reward: halving . This event takes place every 4 years and aims to halve the mining reward, obtained by miners with each new validated block.
So far the reward has been 12.5 BTC per block; it will be reduced within a few hours to 6.25 BTC per block .
The concept is relatively simple and the mechanism is in 5 small lines in the code of Bitcoin, yet this event does not fail to stir the entire cryptosphere with each iteration.
Halving = Bitcoin to the moon ?
For many, the halving of Bitcoin is synonymous with increase in the course of the asset . An idea not so preposterous, compared to the previous halvings . Indeed, whether during the halving in late 2012 or that of mid 2016, the price of bitcoin in both cases increased during the following year.
Certain warning signs suggest the possibility of a rise following the halving . Indeed, as Jameson Lopp, CTO of CasaHODL pointed out, on Twitter , the interest around the event is 3x higher than the interest carried in 2016 , according to data from Google searches.
Although interest is growing, the particular circumstances in which the financial markets bathe following the Covid-19 (whatever they are) could well make this halving an exception to the rule!
Minors on the front line
If the price of bitcoin does not react positively to this event, many miners could see the profitability of their activity plummet .
Indeed, with the halving of the reward, it is the production cost of a BTC that increases proportionally, because it will be necessary to provide twice as much computing power to hope to keep a constant production. However, as Sebastien Gouspillou, CEO of BigBlock pointed out to us, “for any minor, halving is a planned moment, not a surprise” .
To prepare, BigBlock sought to lower its production cost by relocating part of its infrastructure to countries where the cost of electricity is low:
“Anticipating it, for us, consisted of looking for MWh in the low range of world prices. We are currently delivering the Virungas farm, the fruit of long-term work. On this site, we will observe the effects of halving in all serenity ... because the only certainty, it is the reward divided by two. The price remains an unknown, the hashrate (therefore the difficulty) post halving also. So the only way to be calm is to be among the 10% of minors with the cheapest electricity. In this position, whether the price goes up or down, this is good news. "
The halving will mainly put the problem to small children , who are not part of the 10% cited by Sebastien Gouspillou who lack the funds and sufficient infrastructure to remain profitable. This could have the direct consequence of centralizing the mining process around actors with the financial means to continue operating, despite a reduction in profitability.
Despite everything that experts and less experts can say, no one really knows what will happen to the price of bitcoin as a result of halving . And you, did you prepare in any way for this event?
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