Original author: NYDIG
原文标题： The Implications of Bitcoin’s Fourth Halving
Original source: NYDIG
编译：Felix, PANews
Gist:
- Bitcoin underwent a reward halving on April 20 (Beijing time), that is, a 50% reduction in the block subsidy, which is the fourth halving since the launch of Bitcoin 15 years ago.
- The halving is the basis for Bitcoin supply fixation, capping the total supply at (closely) 21 million.
- The volume of the reduction in supply is only 0.6% of the daily trading volume and has a smaller impact on prices than it used to be.
- The economic impact of the halving is even greater for miners, who have a 50% reduction in their main source of income.
- After the previous halving, the mining difficulty was reduced by 5.4% - 14.7% due to the elimination of uneconomical hash rates. However, given the Bitcoin price and the breakeven of the mining rigs, it's unlikely that too much hash rate, if any, will be offline.
Brief introduction
At block 840,000 on April 20, Bitcoin will experience an event that has only occurred 3 times before, namely the halving of the block reward. This event, also known as the "halving," is critical to the economic outlook for Bitcoin's scarcity. For some, the event was a significant price driver, with a 50% reduction in the daily supply of new Bitcoin. For others, the event was a technological milestone and a testament to the code that Satoshi Nakamoto championed 15 years ago. For others, such as miners, the incident could pose a risk to business models and cybersecurity.
This report will look at the impact of the halving on prices, cybersecurity, and miners. This article will look at previous halves, look at current networks and prices, and make educated guesses about what might happen in the future.
What is Halving?
The Bitcoin block reward halving means that 50% less new Bitcoin is awarded to the creator of the new block, i.e. the miner. Miners are incentivized to create blocks, add new transactions to a growing database (known as the blockchain), and are rewarded in two forms: transaction fees and block rewards (also known as block subsidies). The transaction fee is paid by the sender of the transaction in the transaction and is a form of "tipping" to incentivize miners to choose their transaction from a multitude of transactions. Transaction fees do not generate new bitcoins, but simply transfer existing bitcoins from the sender to miners.
However, block rewards are how Bitcoin was born. As an incentive to create and propagate new blocks, the Bitcoin protocol mints new bitcoins to miners. When the Bitcoin network was launched in 2009, the block reward was set at 50 BTC from the genesis block (block 0) to block 210,000. Every 210,000 blocks, approximately every 4 years, Bitcoin will reduce the block reward by 50% based on the expected 10-minute block generation time. After 3 halvings, the block reward is 6.25 BTC, which will be reduced to 3.125 BTC from April 20.
Bitcoin's reward halving is the basis for its limited supply, which is a key economic feature. The supply cap, which is the proverbial 21 million bitcoins, but more precisely 20,999,999.9769 (slightly lower due to the unusability of bitcoins), is achieved through a subsidy halving. As part of the Bitcoin Code, the block subsidy measured in satoshis (0.000000001 BTC) has reached a point where it can no longer be halved. This milestone was reached at the 33rd halving, which occurred at block 6,930,000 in 2140. Once this is reached, no new bitcoins will be generated, and the final satoshis will be circulated.
The economic significance of halving
The Bitcoin halving has significant economic implications. Since the block reward is how new bitcoins are generated, the halving reduces the annual growth rate of new bitcoins (often referred to as the "inflation rate") by 50%. In the short term, the growth of the Bitcoin supply will decrease from 1.7% per year to 0.85% per year. There's nothing special about the 21 million Bitcoin cap chosen by Satoshi Nakamoto, just some broad assumptions about acceptability and use, but its scarcity is meant to give value. While the declining supply function may mimic real-world commodities in the abstract, in reality, the annual supply growth of commodities such as gold is exponential.
Another economic impact could be on the network itself. Bitcoin's block subsidy is the main source of income for miners. Before the advent of Ordinals a little over a year ago, block subsidies accounted for 97-98% of miners' income, while transaction fees accounted for only 2-3% of revenue. While this figure has just jumped to 11.2%, a 50% reduction in the main source of miners' revenue could still have an important impact on cybersecurity and the miners themselves.
Miners rely on block subsidies for their income
Miners are the lifeblood of Bitcoin, producing new blocks every 10 minutes. Miners play a vital role in aggregating transactions and adding them to the blockchain. In return, miners receive bitcoins through block subsidies and transaction fees attached to transactions.
Throughout Bitcoin's history, miners' income has been derived primarily from block subsidies, not transaction fees. Since its launch, the block subsidy has accounted for 98.5% of miners' revenue, with only 1.5% coming from transaction fees. The importance of transaction fees has been on the rise, especially with the introduction of Ordinals and inscriptions. In March of this year, transaction fees accounted for around 5% of miners' income (this figure recently jumped to 11.2%). In some recent blocks, transaction fees have even exceeded the block subsidy. Despite this shift, miners are still heavily reliant on block subsidies, so the halving is a big deal for miners. As the block subsidy decreases after the halving, miners will become more and more reliant on transaction fees to generate revenue.
What can we learn from previous halves?
This halving is the fourth halving of Bitcoin, and while the previous 3 halvings are not too many to draw definitive conclusions from them, they are still instructive because cryptocurrencies tend to repeat their development patterns. Based on this, the price of Bitcoin before and after the halving, the adjustment of network difficulty, the change of hash rate, and the hash price (the value of miners' hash) have certain reference value for investors.
Price performance
The impact of the halving on the price of Bitcoin is a frequently discussed topic, especially for investors. While past performance is not indicative of future performance, there seems to be some repetition of past patterns. Looking back at previous halvings, Bitcoin has rebounded strongly, and this halving is no exception, with Bitcoin rising 155% last year. In the 360 days before the previous three halvings, Bitcoin rose by 317%, 125%, and 23%, respectively.
While Bitcoin showed strong momentum in the previous halving, it saw even greater growth in the 360 days following the halving. The previous three halves have increased by 2,819%, 803% and 707%, respectively. An interesting difference in this halving is that Bitcoin reached new all-time highs before the halving, unlike past cycles that reached new highs after the halving.
While the outlook for the Bitcoin cycle remains positive, the surge in demand for spot ETFs may have accelerated the return cycle.
The difficulty adjustment reflects the hash rate offline
The difficulty of Bitcoin is a key indicator of network mining activity and plays a vital role in the process of creating a new block. This metric is directly related to the network's hash rate, which fluctuates depending on whether the miner is online or offline. Every 2,016 blocks, or about two weeks, the difficulty level is adjusted. The impact of the halving event on the miner economy should not be underestimated, as it directly affects the size of the hashrate and thus the level of difficulty. When the difficulty is reduced, it means that the less efficient miners are shutting down the machine. Looking at the historical data, we can see that miners increased their hash rate before the halving event, reflecting a significant increase in difficulty.
While the difficulty may have decreased somewhat since the halving began, the general trend shows a significant increase in the difficulty level at 360 days after the halving. This highlights the resilience and adaptability of the Bitcoin network in response to changes in mining activity.
An important factor to consider during the halving, especially for miners, is the potential impact of the hashrate going offline due to a drop in profitability. Since the halving essentially doubles the breakeven price for miners (excluding transaction fees), there is speculation that miners running on top of these costs may be forced to shut down.
However, NYDIG's prediction for this halving is that the hash rate is rarely, if present, will be offline after the halving, as some of the oldest miners are still profitable at the current price level. In previous halves, the downwards peaked at 13.7%, 5.4%, and 14.7%, respectively.
The hash rate was halved and corrected, but then continued to grow
The network hash rate reflects the pattern of difficulty adjustment before and after the halving, and it is common to see a spike in the network hash rate as the halving approaches, as miners ramp up their operations to maximize returns. After the halving, the hash rate may temporarily decrease as the less profitable mining operations go offline. However, historical data shows that hash rates typically stabilize and bounce back as networks adapt to new environments. Based on the current market price and the breakeven of miners, most mining rigs will not be offline or shut down during this halving.
High variability of hash prices
The hash value (known as the hash price) is a key factor for miners and can vary significantly before and after the halving, which is affected by block rewards and transaction fees. In some cases, such as the current halving, the hash price spikes before the halving happens, while in others, it decreases. Typically, after the halving, the hash price drops by about 50%, depending on how much the fee contributes to miners' income. However, the 360-day results after the halving proved to be unpredictable, with some cases showing an increase from the initial level and others a significant decline after a sharp rise.
Reduced supply is no longer so important
Given the reduced amount of new supply available to investors, a common view surrounding the halving event is the positive impact on prices. That sounds like it, as the daily supply of Bitcoin is expected to decrease by 450 on April 20, bringing the daily supply to about $31.5 million at a price of $70,000/BTC. However, in terms of global trading volume, this decline is only 59 basis points (about 0.6%) of daily trading volume, which is a relatively small percentage. It's worth noting that this percentage has been much higher in the past and is likely to have a greater impact on volume and price. For example, the first halving of supply reduced the trading volume by about 10.64%, and the impact is even more pronounced compared to the current situation. NYDIG believes that the demand side, particularly in relation to spot ETFs, will play a more critical role in determining price than supply.
conclusion
With the halving just completed, it is necessary to recognize its importance in the history of Bitcoin. This rare phenomenon has implications not only for technology, but also for the economy of the entire ecosystem. While the direct impact of the halving on the price of Bitcoin may diminish over time, the halving remains a key factor in understanding the Bitcoin price cycle. While this event will reduce miner revenue, halving and difficulty adjustment are essential features of Bitcoin's programmatic and supply-fixing.