Bitcoin Mining Profits Halved, but What Does This Mean Exactly?

By Bill Toulas / May 12, 2020

Bitcoin went through its third reward halving in history, so the new mining rewards are set to 6.25 bitcoin per block, whereas previously, they were set to 12.5. The first two halving events occurred in November 2012 and July 2016, while the next one will take place in May 2024. Bitcoin is the world’s first and most popular cryptocurrency and has determined the maximum amount of Bitcoin coins that can circulate in the world ever since its inception in 2009. This number was set to 21 million, and we are now counting roughly 18 million Bitcoins, so we’re getting closer to the ceiling.

So, what does this mean for the Bitcoin community? The particular cryptocurrency was already balancing on a very thin thread in terms of mining gains vs. the energy costs. Only large farms of powerful and also highly efficient computers could deliver profits from Bitcoin mining. The only way for others to keep going was to use renewable energy sources for the powering of the mining systems. Yesterday’s halving, though, is making such setups entirely infeasible, so we expect to see all small players leaving the Bitcoin ecosystem now.

Of course, these systems won’t be scrapped, but they will just resort to mining other more profitable cryptocurrencies. This resource redirection means that the Bitcoin network will experience a sudden loss of systems that secure it and also process and confirm the transactions that are made in it. This doesn’t mean that Bitcoin has gotten less secure overnight. Certainly, larger farms will be forced to grow even larger to squeeze out even more. Whatever these farms made from Bitcoin mining, they are now making 50% of it. All of this will continue until the first half of the next century - when the '21 million' mark is expected to be reached, and Bitcoin mining will stop entirely.

As for where this leaves cryptojacking, Bitcoin mining was already an extremely rare choice for threat actors of this type, and the whole field is generally deteriorating quickly. The last time we saw some serious activity on that part was in 2018, while 2019 merely confirmed the downward trend. Still, you should beware of JavaScript snippets running on your browser or IoTs to mine Monero (XMR).

Finally, there’s the question on the Bitcoin price and how it’s going to move from now on. On May 7, 2020, Bitcoin equaled $10,000, while yesterday, it tumbled to $8,600. Experts in the field believe that the trend will be upward, as this has been the case a few weeks after the last halving events. This rise in Bitcoin’s price will be driven by investments, which are fueled by the gradual increase in the trust towards the cryptocurrency. It is surviving a global pandemic, and it's set to endure another halving event - so with every day that passes, the trust in the Bitcoin network increases. Not everyone agrees with this prediction, though, as some see a stabilizing pullback to the $6k range.

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