Author: AA Great God
Chinese translation: Cobo Wallet
Netizen Dumb Janos asked: "What will happen when the block height on the Bitcoin network reaches 6,930,000 by 2140? Can we still carry out Bitcoin transfers at that time? Why?"
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This topic is very common, and many people have asked similar questions.
Netizen George asked: "How do you motivate miners if there is no block reward?"
According to Dimitris: "Miners also earn transaction fees by verifying transactions. According to the volume and adoption of Bitcoin transactions at that time, the transaction fees are sufficient (incentives for miners)."
We will face this situation in the future. When the block reward changes from 1 Satoshi to 0 satoshi, no new Bitcoin will be generated as a block reward. Now what you need to know is, will miners continue to mine? This is a question that every mine and every miner asks every day, but the efficiency of mining equipment is different, and everyone thinks about it differently.
There are many variables that miners need to consider when weighing this issue. When the block height on the Bitcoin network reaches 6,930,000, nothing special will happen suddenly; ten blocks, one hundred blocks, one thousand before There is nothing special about this block.
It's kind of like your 18th birthday. Many changes have taken place after 12 o'clock. Legally you suddenly become an adult. But does this mean you at 11:59 and you are two different people at 12.01? Do you start acting like a mature adult after 12 o'clock?
For most people, this is a gradual process. There won't be a magical moment, something happens suddenly.
Bitcoin mining is a very complex dynamic economy and depends on many variables. All variables interact and influence each other. In order to make every miner who owns ASIC mining equipment profitable, therefore, decisions must be made daily based on their current profitability and expected profitability in the next few days / weeks / months.
The factors they consider today whether they will continue to operate equipment mining include: the efficiency of ASIC hardware-each device may be different, imagine that there are a thousand ASIC mining machines in a warehouse, some of which are currently the latest Efficient systems, but some of them may be older or older. Therefore, if the most efficient mining machine can make money and the inefficient mining machine cannot be profitable, the miner can choose to close the lowest efficiency mining machine. But in many cases, because they have pre-purchased electricity, they may decide to continue operating at a loss.
Every day, tens of thousands of miners make decisions among millions of mining hardware equipment, making decisions on how to operate profitably under conditions. There are many factors that need to be considered to make this decision, one of which is the block reward-how many bitcoins are rewarded for each block mined, this reward will be halved every four years. Miners know in advance that earnings will change in the spring of 2020, because block subsidies will be halved, and they also know that the market will respond to these changes, which will affect the price of Bitcoin. Profits (from the price increase) may make up for the losses caused by the reduction of block rewards. They will make decisions a few months in advance, buy better and more efficient mining hardware, negotiate cheaper electricity prices, or pass Exchanges and the open bitcoin market do hedging to accommodate possible future risks. They can use futures to hedge certain risks. Miners pay electricity in currency and the block reward is bitcoin. Therefore, the exchange rate between bitcoin and fiat currency is really important to their profitability.
Electricity costs, equipment efficiency, operational efficiency, and forecasts and expectations of future prices, all of which play a role every day
Help miners determine which devices are still effective, which need to be upgraded faster, or even change some operational strategies. These decisions are made every day.
Nothing magic happens until the 6,930,000 block. Halving is not an emergency. Because from the first day of operation, miners can foresee and plan and prepare in advance.
Looking back at previous halving events, there will be media panics, such as when Bitcoin will cease to function. In fact, nothing big happened on the day of the halving, although the market changed significantly in the next few months or years.
Keep in mind that one of the most important factors is the difficulty of mining.
Let's take a look:
What if some miners find it unprofitable?
They will shut down some of the miners with the least efficiency; or they may shut down all miners due to excessive electricity prices. Not all miners have the same profitability, and those miners with the lowest efficiency and the highest electricity costs are not profitable. These miners shut down their equipment, leaving behind miners who own high-efficiency mining machines and low electricity costs. They will not shut down the mining machines. As some miners shut down, the hashrate will decrease. The mining difficulty will be readjusted for up to two weeks. With fewer miners participating in the competition, the difficulty of mining will decrease. This means that miners who used to make little profits but continue to mine will now increase their profits because the difficulty of hashing is reduced. They will get a bigger share of the mining revenue. In the short term, the speed of block mining will slow down. For example, if the computing power is reduced by 50%, this means that half of the miners have shut down the mining machine, although this is unlikely to happen.
The result of this situation is: the block generation time will increase to one every 20 minutes instead of one every 10 minutes, but this situation only lasts for a week to a week and a half, and then the difficulty will be readjusted to become a block every 10 minutes, The profits of miners who continue to mine will increase. Because the difficulty is reduced by half, they can dig up twice the block, so those who persist for a long time can earn a lot of money. You may also have realized that almost unprofitable miners may decide to continue mining, because after all, the difficulty will be readjusted, some less efficient competitors will withdraw, and the market will gradually shift to eliminating less efficient players. And recalibrate the difficulty, so miners are always barely profitable. If this means less mining profit, then there is no way it will reduce mining profit.
This has happened many times throughout the history of bitcoin. If bitcoin's computing power today is only one-tenth, it can still run very safely without encountering any problems. How did I know? A year and a half ago, the mining computing power was one-tenth of what it is now, and the Bitcoin network is very secure. So even if there is no block reward, there will not be any substantial changes. When the halving comes, nothing will happen. A group of miners will shut down. Nothing will happen except the delay of the block generation time. Then in less than two weeks, the difficulty was readjusted. This is a dynamic system that adapts constantly to change.