The great Bitcoin block reward halving is finally upon us. In a few more hours, block rewards for miners will be reduced by 50 percent, with as-yet-unknown consequences for the Bitcoin industry.
Also read: The Bitcoin Halving Doomsday Scenario
Around the world, Bitcoiners are watching countdown clocks and block explorers in anticipation. Which mining pool mined the last 25 BTC block, and who mined the first of the new 12.5 BTC blocks? Would this be seen as a good or bad omen for the pool?
For the record, the last block mined with a 50 BTC reward in 2012 went to BTC Guild, while the first block mined at 25 BTC was shared among Slush’s Pool.
A glance at /r/Bitcoin on Reddit indicates the halving is first and foremost on the minds of the Bitcoin community. Many local groups are throwing “halving parties” to celebrate the event.
The Big Question
The big question is, of course: what will happen to the bitcoin price? In the aftermath of the halving, will it suddenly soar, or plummet? Or will everything continue as usual, with little to no change at all?
Although block reward halvings are scheduled to take place every 210,000 blocks (roughly every four years) and were programmed into the protocol from the very beginning, this is the first time a halving has happened at such high stakes.
At the time of the previous halving, on November 28, 2012, one bitcoin was only worth around $12 USD — a significant amount at the time, well below the record high. There was virtually no professional Bitcoin industry to speak of then, with none of the multimillion-dollar funding deals we see today. Bitcoin was still largely unknown in the mainstream media.
The price, however, was never $12 again. Although it didn’t happen immediately, the price began to climb shortly after the halving and in 2013 went on to exponentially higher records.
With many more professional speculators and day traders watching bitcoin events and their effects on price these days, it’s possible there could be a similar reaction.
Miners will Feel the Greatest Impact of the Halving
If the block reward halves without a commensurate rise in price, mining could become instantly unprofitable — especially in places where energy costs are higher.
The majority of the world’s mining activity, however, is believed to be concentrated in China. Even though energy costs are lower and often subsidized in that country, many mining operators run on thin margins with large overheads for new equipment, power costs and staff.
Eric Mu, of miner HaoBTC in Beijing, said his company wouldn’t be commemorating the event at the time of halving, though it would hold a post-halvening party a few days later.
Mu added that he didn’t predict any major impact on price — at least not immediately.
All Part of the Grand Plan
Satoshi Nakamoto assumed that the bitcoin price would rise over time, compensating miners for the reduction in actual BTC rewards.
It’s not clear whether a halving would actually cause the price to rise, however, or if Satoshi felt normal economic circumstances would produce that result around the same time periods.
As always, every new day in Bitcoin seems to bring a whole new set of circumstances for the community to work with. The halving will be no exception.
What’s your prediction? Is the halving anything to celebrate, or is it really just another day in bitcoinland?
Images courtesy of Averette at English Wikipedia, Spells of Genesis.