If you want to get a glimpse of the future chart of Bitcoin, you may take a closer look at its block reward over time.What is the future of Bitcoin mining as miners rewards reduce due to halvings?
One of the rarely debated topics is what happens to Bitcoin over the course of years with respect to miners’ reward. This is considering the fact that the block reward for Bitcoin halves every four years.
Block reward is the incentive that the miners have for verifying transactions on the Bitcoin network and thereby contributing to the security of the network.
Diminishing Reward for Miners
In 2024, the year for the next halving, a miner would be rewarded with 3.125 bitcoins for mining a block. In 2052 (30 years from now), the mining reward would have been reduced to 0.02441406 bitcoins. In 2092 or 70 years from now
This is a built-in mechanism by the inventor of Bitcoin to make it a deflationary cryptocurrency. There are many people who are of the opinion that as the block reward reduces, that there would be no incentives for miners to continue to protect the network through mining activities as a result of low reward.
If you look at the data showing what the block reward of BTC would be over time, you may wonder if there would still be a motivation for miners.
Considering the reducing block reward, it is evident that there would be fewer businesses going into mining of bitcoins in the future. At the moment, it is already a tough call going into mining and this difficulty would become even more apparent in 2024 when the next halving of Bitcoin will occur.
Andy Bebut, a market analyst expressed this concern in a comment:
“Even today it’s impossible to set up a profitable mining operation. In 2024 the loss will be guaranteed. Someone will mine occasionally if paid for this to the extent of the block reward, in cash.”
Will Miners Close Shop?
It is not possible to infer that diminishing reward would demotivate mining. When we consider the main reason why Bitcoin halving occurs, which is to make the coin scarce and increase its value, we would readily deduce that the value of BTC would be high enough to keep miners motivated in the future.
This is already apparent from the fact that whenever halving occurs, the market value of BTC goes up. The implication of this is that the value of the rewards that the miner receives isn’t diminishing. For instance, the block reward for Bitcoin in 2009 was 50 bitcoins, the value of 50 BTC was about $40.
At the time of its first halving in 2012, the price of BTC was just $11. During the second halving of 2016, the price of Bitcoin hovered around $500. This halving triggered the bull-run of 2017 that saw the price of BTC rise close to $20,000.
In May 2020, the third halving of Bitcoin occurred when the coin was trading around $9000. This was also associated with a bullish market that propelled the price of BTC to $30,000. With the block reward of 6.25 in 2020, a miner gained 6.25×9000= $56,250.
However, analysts are of the opinion that the price of Bitcoin may not always spike due to halving as the market matures. Tom Frazier, CEO of Redivider Blockchain, a bitcoin mining fund said.
“Today and into Bitcoin’s maturity, each halving is likely to have less and less impact on the price, especially as more countries adopt the cryptocurrency and a more stable technological and regulatory infrastructure is put into place.”
What if Bitcoin Doesn’t Rise To $1 Million
It is expected that the last halving of Bitcoin will occur by 2140. We can see that by 2132, that the block reward would be 0.00000001 BTC so we can envisage that this would be a small amount of reward judging from the value of Bitcoin today. However, if the price of Bitcoin rises really high to say $1 million, this may still be a motivation for miners, considering that they have continued to be in profit year after year with the current trend of Bitcoin market history.
Tracy Levine, Head of Data Analytics and Decision Science at the Blockchain Chamber of Commerce said that 3 of the total of 64 expected halving having occurred,
“If the trend of higher highs and higher lows after a halving continues, the future price of Bitcoin should likewise continue to serve as an inflationary hedge against other representations of value that can be arbitrarily inflated.”
However, at some point, miners’ rewards would be coming mainly from confirmation of transactions. This is how Bitcoin has been designed from the onset by Satoshi Nakamoto.
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