What is the impact of halving BCH, BSV, and BTC?

1. The birth of BTC, BCH and BSV

In 2008, Satoshi Nakamoto published a white paper "Bitcoin: A Peer-to-Peer Electronic Cash System", stating his new vision for electronic money-Bitcoin is here. The white paper builds a decentralized electronic cash system based on P2P network transmission. Through this system, we can realize global instant electronic cash transfer and solve the problem of generating, storing and transferring exchange value on the Internet. On January 3, 2009, the Bitcoin genesis block was born. Bitcoin was initially only popular in geek circles. After several years of development, bitcoin has gradually entered the public's field of vision, the user group is constantly expanding, and the price of the currency is also high.

However, since the second half of 2013, many users reported that their transactions were delayed for a long time before they could be executed. Observation found that this was due to the fact that Bitcoin was unable to process network-related information in time. The Bitcoin system adds a block to the blockchain every 10 minutes. However, under the limit of 1MB block size, the transactions that can be stored in each block are very limited, thereby limiting the throughput of the entire transaction. The bitcoin network is beginning to be congested, the handling fees are too high, and transactions cannot be packaged for a long time. At that time, Bitcoin could process about 4-7 transactions per second. If compared with the global payment network Visa, American Express or PayPal, Visa would need to process 4.7 transactions per second in the Christmas season of 2013. Obviously, the transaction efficiency of BTC at that time could not bear the function of cash payment.

In 2015, there was a voice of expansion in the Bitcoin community. Miners supported expanding Bitcoin's blocks to increase transaction capacity, and small blockers represented by Core developer Core believed that this could not fundamentally solve the problem. Use segregated witnesses and lightning networks to alleviate Bitcoin's congestion. The game between miners, development teams, and users is relatively chaotic. The Bitcoin community has been arguing about capacity expansion for three years. The community conflicts have gradually been unable to be reconciled. At the same time, the sound of hard forks has also intensified. Finally, on August 1, 2017, the miners performed a hard fork at block height 478558. Six hours later, the ViaBTC mining pool successfully dug the first bitcoin (Bitcoin Cash) block (nr 478559), the Bitcoin community Since then it has been divided into two.

Bitcoin Cash undertakes the transaction data of Bitcoin. However, the segregated witness was deleted, and the block limit was upgraded to 8M (later upgraded to 32M), dedicated to solving the problems of block congestion and high handling fees in the Bitcoin system through on-chain expansion, and then according to the ratio of 1: 1 Distribute BCH to Bitcoin holders. To improve the system, BCH conducts a hard fork every six months. Since then, BCH has undergone several upgrades, and the system has gradually stabilized. The market value has entered the top ten of crypto assets.

In April 2018, the BCH community released a mid-term development roadmap, stating that it will upgrade and improve BCH technology. It mainly includes two aspects: one is expansion, the block size is changed to 32MB (completed in May); one is to add or reactivate several bitcoin script operation codes (op codes) in order to allow the BCH network to own and Ethereum-like smart contract application, thereby expanding more applications of BCH.

However, Australian scientist CW, who claimed to be Satoshi Nakamoto, clearly opposed the plan. He believes that Bitcoin has established a solid foundation in the 0.1 version. All BCH needs to do is: 1) expand capacity; 2) lock in the agreement and declare that it needs to "completely" Block the underlying Bitcoin protocol and expand it to 128MB. " To this end, a project called Nchain was established, and a BSV node client was created on August 16, 2018, threatening to implement a fork of Bitcoin Satoshi Vision (BSV) on the BCH protocol, with the goal of recovering Bitcoin Original agreement.

After several rounds of confrontation between the two camps, the contradiction reached the extreme again and could not be coordinated. On November 16th, BCH officially forked into BCHABC and BCHSV. This fork led to a split in consensus, and the mainstream currency plummeted. Since then, BSV conducted a "hard fork" on July 24, 2019, increasing the block size from 128MB to 2GB, which is higher than any other blockchain project. And within a few days after the upgrade, the BSV chain successfully dug 256MB blocks, refreshing the world record of the largest block dug by the public chain.

(The birth of BTC, BCH, BSV, the picture comes from OKEx investment research)

At this point, bitcoin has formed a three-nation trend.

2. Mechanism design and strategic vision of BTC, BCH, BSV

In fact, the battle between hard and soft forks is just an appearance, and it is essentially a battle for lines.


Core adheres to the 1M block size to ensure a lower threshold for full nodes. Even an ordinary computer can run a full node, which is more decentralized. It is advocated to use segregated witness and lightning network to alleviate the congestion problem of Bitcoin.

In August 2017, Core-led BTC officially activated the segregated witness function for capacity expansion. In December 2017, the Lightning Network was also successfully deployed on the Bitcoin mainnet. Segwit and Lightning Network are both part of the blockchain expansion plan. In simple terms, SegWit refers to splitting the information of a transaction and only recording some important information in the blockchain to reduce the size of each transaction and increase the number of transactions processed in each block . The Lightning Network uses partial transactions to be processed off-chain. The transactions between the two parties in a period of time are only recorded by the two parties. After a period of time, the final transaction results are broadcast to other nodes and recorded in the blockchain. In this way, multiple transactions only need to be recorded once, which is suitable for frequent and small transactions.

According to statistics from 1ml.com, as of April 8, the carrying capacity of the Bitcoin Lightning Network was 945.49 BTC; the number of nodes was 12,117, which increased by 4.24% in the past 30 days; there were 36,336 channels, which increased in the past 30 days 0.4%, 183 nodes, altogether 291.09 LTC mortgaged. Comparing the data on April 19, 2019, the carrying capacity of the Bitcoin Lightning Network was 1063.42 BTC, the number of nodes was 8065, and the number of channels was 38637. In the past year, the number of Bitcoin Lightning Network nodes has not risen but has fallen, and the development is weak.

(BTC lightning network data, the picture comes from 1ml.com)

BTC is still unable to get rid of the problems of congestion and high fees, it is difficult to shoulder the most important function of cash "payment", and embark on the "electronic gold" stored value path.


BCH expands the block size of 1M to 32M, and adheres to the on-chain expansion route. And re-enable a batch of OP-codes, the operation code will allow the creation of different types of metadata, such as representative tokens and the implementation of smart contracts, users can create some complex applications on it. Explore the way to integrate payment and application. However, the dissolution of the wormhole and Copernicus development team announced the temporary failure and end of the smart contract. Judging from the recent development route of BCH, there is another intention to return to pure "electronic cash".

(Encrypted token ATM histogram, picture from coinatmradar)

The ATM machine can provide users with services including encrypted token exchange and withdrawal, encrypted token purchase and cash transfer. As of April 8, 2020, there were 7476 encrypted ATMs worldwide. At present, there are 2557 ATMs providing BCH withdrawal or deposit services worldwide, accounting for 34.2% of all cryptocurrency ATMs, ranking fifth in the total number of cryptocurrency ATMs. A total of 7471 ATMs provide BTC withdrawal or withdrawal services, accounting for 99.9% of all cryptocurrency ATMs. BCH is still far below BTC in terms of payment consensus.


BSV conducted a "hard fork" on July 24, 2019, increasing the block size from 128MB to 2GB. In the genesis upgrade, it completely removed the concept of hard on-line, so Bsv is also called infinite expansion. In theory, bsv can generate huge blocks. After lifting the block limit, Bsv laid the foundation for mass storage. You can save more things on the Metanet network faster. BSv's vision is to create a blockchain of global public data ledgers that can be used by enterprise applications. It wants to attract companies and applications that want to develop in a standardized and friendly environment. Its development route is the global ledger, and the underlying public chains such as ETH, Cosmos, and EOS are targeted. At the same time, BSV claims to embrace regulation and take a compliance route.

However, the price of BSV has been severely controlled because of several "demon rises" and is called demon currency. CSW, a community leader who claimed to be Satoshi Nakamoto, was also caught in the negative.

Forking is the light of freedom in community governance. Different factions adhere to their own routes through forking. At present, BTC, BCH, and BSV are also exploring on their own roads.

3. Analysis of BTC production reduction

3.1 BTC halved

When Satoshi Nakamoto designed the Bitcoin system, in order to control the overall issuance of Bitcoin, it was stipulated that after every 210,000 blocks were generated, Bitcoin output was halved. At the beginning, each block produced 50 bitcoins, and then gradually halved until it approached zero. Because Bitcoin has set a difficulty factor based on its computing power, it generates an average block in about 10 minutes, so it is halved approximately every four years. According to this rule, Bitcoin will reach its set limit of 21 million by 2040.

(Bitcoin chart, the picture comes from the network)

Throughout the history of the Bitcoin market's reaction to the price halving, Bitcoin assets have shown a clear upward trend. For example, from the first halving in November 2012 to November 2013, the price of Bitcoin rose by 82.1%. Similarly, after the second halving in July 2016, the bitcoin price jumped from $ 651 to $ 2518 and tripled in just one year. Through a longitudinal comparative analysis of the historical data of Bitcoin's two production cuts, we see that Bitcoin will have a short-term (up to several months) upward trend before the production reduction date; This is the bull market in the cryptocurrency market. Therefore, at present, there is generally a good expectation that the currency price is expected to increase by half.

After a lapse of four years, Bitcoin will once again halve in May 2020. What impact will it have on the Bitcoin ecosystem?

3.1.1 Analysis of Bitcoin halving event from supply and demand

The halving of production will give investors the expectation of a decline in supply in the future, breaking the original balance of supply and demand. According to the analysis of economics pricing principles, it is assumed that the supply growth rate will decrease and the price theory will increase under the condition that the demand growth rate remains unchanged. Of course, the actual price change result is also affected by many other factors.

The relationship between supply and demand is the lowest order in economics. Price is determined by supply and demand. If demand remains unchanged and supply decreases, prices will rise. In practice, demand is not fixed. When the obvious event of reduction in supply is approaching, most people will overdraft supply in favor of expectations, so that the price increase caused by the reduction in supply will be transformed into unquantifiable demand, resulting in a price bubble. When the supply declines, but when the demand keeps returning to balance, then the price appears to fall. Therefore, bit halving will also follow this price law.

(1) Consensus demand is the main factor that determines the price of Bitcoin

Due to the limited supply of bitcoin, the price will continue to rise under the premise that the public is optimistic about bitcoin, and bitcoin can obtain a premium for valuation. Then the computing power of the entire network used to mine bitcoin will increase and the cost of mining will also increase. It will increase; if the number of people who approve bitcoin becomes less, people's demand for purchases will decrease, and the price of bitcoin will fall. Once the mining cost is broken, miners will give up mining. Will decrease. Therefore, the consensus demand determines the bitcoin price, and the bitcoin price affects its network-wide computing power and mining costs.

There are many factors that affect the demand for consensus. In addition to the network performance and technical updates of the Bitcoin network itself, and the development of competing currencies, the influence of public opinion, security incidents, and national policies also determine the demand portion of Bitcoin. In addition, Bitcoin prices are also directly affected by certain types of global political and economic events.

(2) Feedback cycle between price, difficulty of computing power, and mining cost

Under the premise that the infrastructure remains unchanged, the higher the bitcoin price, the more attractive the mining. At this time, the competition of miners becomes more intense, the computing power of the entire network increases, and the difficulty of mining becomes higher (the system will adjust the difficulty in the next cycle, with a certain lag), and the mining cost becomes higher. Once the price cannot cover the mining cost, the mining It will no longer be profitable, and small miners will withdraw or be merged.

The decrease in the number of miners reduces the computing power of the entire network, and the difficulty of mining also decreases (plus the gain effect of the system itself adjusted according to the difficulty of the previous cycle). At this time, the miners who have withdrawn from the market have a tendency to sell, and the price of Bitcoin has Of decline. The accumulation of market selling sentiment has caused the price to fall further, and more miners will withdraw from mining until the new equilibrium currency price no longer falls. Once the market turns warmer and the price of coins rises, it is less difficult to mine at this time, mining profits increase, the attractiveness of mining increases again, miners join again, and competition returns to fierce.

Therefore, the mining cost also reacts to the price through the behavior of the miners.

(Mining feedback cycle diagram, picture from OKEx investment research)

(3) Factors that affect the cost of Bitcoin mining by miners

The essence of mining can be simply understood as all the mining machines in the world work together to draw a random number hash value. The probability of winning is the computing power of the mining machine / the total computing power of the world. The factors that affect the miner's bitcoin mining cost are: block rewards, computing power, network-wide computing power, and operating costs.

The breakeven cost is very important for miners to mine. The breakeven cost refers to the miner ’s mine is under normal operation, and the profit obtained by mining with a mining machine is not enough to pay the currency price of the electricity consumed by mining. It can also be understood The mining cost price or shutdown price for digging a certain coin. If the currency price falls below the "shutdown price", then mining will naturally lose money.

The price of the shutdown currency is mainly related to the performance of the mining machine itself, electricity cost, block reward and computing power of the entire network. Among them, the two factors of miner performance and power cost are basically fixed, while the factor of block reward is There are changes (involving handling fees), but the overall change is not large. The only thing that fluctuates greatly is the computing power of the entire network.

Therefore, the formula of mining machine breakeven is:

Operating cost per day for a single mining machine = BTC revenue per day for a single mining machine

Operating cost of a single mining machine per day = average number of coins mined by the mining machine per day * shutdown currency price

Shutdown currency price = daily operating cost of a single mining machine / average number of coins mined per day by a single mining machine

The operating cost of a single mining machine is basically unchanged, and the Bitcoin mining reward is halved. In theory, the average number of coins mined by a single mining machine in one day will be halved, so the calculated "shutdown currency price" is about the original double. In other words, the "intrinsic value" contained in a single bitcoin has tripled, and the "mining cost bottom" will also double. Of course, the shutdown currency price is actually adjusted dynamically, and the influencing factors include the proportion of a single miner's computing power in the entire network, the difficulty of mining, block rewards, and operating expenses.

Commodity prices are affected by the relationship between supply and demand, and fluctuate around value, which is the form of expression of the law of value. The rising cost of mining will cause Bitcoin to fluctuate around a higher value.

3.1.2 Impact on stakeholders

(1) Miners: For the Bitcoin miners produced separately, as the global computing power continues to increase, the revenue from mining BTC must gradually decrease and gradually approach zero, and backward mining methods or equipment will Facing elimination. The halving caused the miner ’s mining reward to be halved. When the currency price did not increase in the same proportion, the absolute profit of the miner ’s mining decreased. Once the price fell too much, the high-cost miners would have to choose to shut down.

In fact, the computing power of BTC has dropped to a certain extent after the last halving. On August 27th, Bitcoin made the first difficulty adjustment after halving, which reduced by 7.61%, which means that some miners withdrew from mining the behavior of.

(2) Mine pool: halving the mining cost will increase, which will cause BTC to fluctuate online and offline around a higher value

This makes miners have higher requirements for the lowest price of Bitcoin. In the case that the mining hardware remains unchanged, the halving of BTC will cause the probability of personal miners digging into coins. Therefore, the way in which individual miners mine will make the profit time more uncertain. This will hinder the rate at which ordinary users enter the field and become miners and prompt more miners to join the pool to smooth the income. Therefore, halving BTC will increase the risk of pool concentration.

(3) Mining machine manufacturer: The relationship between bitcoin price and mining machine order is essentially a supply-demand balance. When the price of bitcoin rises, the mine owner or mining machine investor expects that the future bitcoin income will increase and the mining machine order will increase; When the price of bitcoin drops, the mining owner or mining machine investor expects that the future bitcoin revenue will fall and the mining machine orders will decrease. The increase in the cost of mining has put forward requirements for more efficient mining machine research and development.

4. Analysis of BCH and BSV production reduction

The last halving of Bitcoin occurred on July 10, 2016, and the block reward became 12.5 Bitcoins. Based on this calculation, the latest halving of Bitcoin will take place in mid-May 2020, and the reward will be halved to 6.25 Bitcoins. Like Bitcoin, the forks BCH and BSV will also cut production on April 8, 2020 and April 9, 2020, respectively.

There is a halving time difference between the three. The main reason is that when BCH is forked from BTC, in order to avoid the problem that the mining power is drastically reduced and the mining difficulty remains unchanged, the EDA emergency difficulty adjustment algorithm is adopted. . In the EDA algorithm, the difficulty of mining can be continuously adjusted down quickly, and there is a chance to increase it after every 2016 blocks. This also led the miners to use the rules, first withdraw the computing power to enter the network quickly when the mining difficulty is low, and then block out until 2016 blocks have been dug. When the difficulty is adjusted upwards, then withdraw the computing power and wait for the difficulty to be lowered again. This not only makes the computing power on BCH oscillating, but also makes BCH's block generation speed too high, resulting in BCH and later BSV blocks that are forked out far more than BTC. In order to change the above situation,

BCH was upgraded from EDA algorithm to DAA algorithm. This algorithm adjusted the difficulty of mining block by block based on the calculation power of the first 144 blocks, which changed this embarrassing situation. However, after the BCH bifurcated into BCHABC and BCHSV, the two have different fluctuations in block time due to different transaction volumes and network computing power.

The proof-of-work algorithms used by BCH, BSV, and BTC are all SHA256, so the algorithms of the three currencies are common, and the mining machines are common. The computing power flows among the three cryptocurrency networks. The motivation of miners to pursue higher returns makes BTC, BCH and BSV have similar daily mining returns. But halving the time difference between the three will have a certain impact.

Since the halving time of BCH and BSV is earlier than BTC, this will lead to the halving of BCH mining revenue. If the price of BCH is not doubled, it will cause some miners to switch to mining BTC without halving. The halved network will lose a lot of computing power. BCH and BSV use the DAA algorithm to adjust the difficulty block by block. When the computing power changes significantly, you can quickly adjust the block difficulty according to the actual computing power, thereby minimizing the impact of computing power changes on the block generation time.

The fluctuation of the currency price can change the direction of the flow of computing power. If the price of BCH or BSV rises while halving, it will reduce the outflow of computing power; if the price of BTC rises due to halving expectations or other reasons, it will attract more More computing power flows to BTC. It is worth noting that the reduction of BCH and BSV computing power will lead to a 51% reduction in attack costs and increase network security risks.

After all three are halved, some computing power will be switched back to the original network until the mining revenue of the three forms a new balance.