Coming Halving to Impact Miners’ Roles, Not Bitcoin Price
Highlighting some of the changes he expects the forthcoming block reward halving to bring to the crypto space, a staunch Bitcoin SV (BSV) advocate supported claims that some market factors may contribute to a possible Bitcoin (BTC) price rise but the halving is not likely to be one of them.
Jimmy Nguyen, who is also the Bitcoin Association President, notes that while a fall in the price of Bitcoin as the 2020 halving gets nearer may mean plenty of room for it to go up, it will be difficult to evaluate which factors actually played the most prominent role if the price rises in the coming two months.
It could be signs of recovery in global financial markets, investor sentiment towards the halving, or even both, he suggests, adding that Bitcoin’s economic system design is meant to incentivize miners through the scheduled halvings hence it could be priced in by the market at any given time.
Nguyen argues that a reduction in the amount of fresh coins coming into circulation may not necessarily translate to a price rise and describes the notion as a “misguided thinking that has artificially driven up Bitcoin prices in the lead-up to past halvings.”
“Going forward, investors need to understand that the block reward halvings should not have an impact on the price of Bitcoin – rather, they should focus on whether a digital currency and its associated technology have real utility,” he says. “This is especially true given the current economic climate, where we’ve seen Bitcoin prices drop 50% in little over a month amidst market turmoil brought on by the Covid-19 pandemic.”
Rather, he expects the pending halving to bring some changes though, like an immediate reduction in profitability for miners especially on the Bitcoin and Bitcoin Cash (BCH) networks whose blockchains, he claims, have not scaled to support greater volume to lead to less limited transactions and less revenue from transaction fees. Less profitable mining on these networks could lead to mining pools switching their hash between the competing Bitcoin networks (BTC, BCH and BSV) based on which is the most profitable at the time.
“After all of the Bitcoin networks have undergone their halving, more miners and enterprises will see that they simply cannot depend on the dwindling subsidy amount earned with each block reward,” he says, touting BSV to be the darling of miners and business as “the only network that has been prepared for this all along” in line with miners being less reliant on the block reward subsidy over time but on revenue from transactions fees. Nguyen explains more:
“After the halving, it will become evident to miners why it is imperative that they explore new transaction fee models, rather than continue to depend on an ever-decreasing subsidy amount for each block reward. Over the longer term, I predict that we will see an industry-wide rethink on the role that miners play within the Bitcoin ecosystem, as well as how we refer to them. The term ‘mining’ was initially used to reflect that the ‘miners’ received fresh coins with each block – the subsidy amount of each block reward – distributed from the fixed supply of 21 million Bitcoins. But moving forward, “miners” will need to be more focused on the number of transactions they process, so that they earn more of their revenue from transactions in order to make up the shortfall from the number of fresh coins they receive as the block subsidy. As a result, I think that we will see a gradual transition across the industry, moving away from the term ‘miners’ in favour of ‘transaction processors’.”