How Bitcoin’s next halving will shape the crypto industry?

02/06/2024 0 Comments

1. How Bitcoin’s next halving will shape the crypto industry?

The upcoming Bitcoin halving event has refocused the attention of the entire crypto sphere, sparking renewed hype and speculation as it does every four years. This predictable event constricts Bitcoin’s production and introduces new scarcity, setting off price volatility. Will the halving provide further opportunities to benefit the crypto industry as a whole?

Halving Countdown Sparks Digital Gold Rush Alongside Heightened Scarcity

The halving cuts the block rewards issued to Bitcoin miners in half, directly reducing the supply of new Bitcoin entering circulation. Bitcoin’s hardcoded deflationary model achieves equilibrium through its ingenious design. By halving miner rewards every 210,000 blocks, Bitcoin enforces monetary discipline and introduces new scarcity every 4 years. This predictable tightening of issuance reduces the inflation rate over time, making Bitcoin an increasingly scarce digital asset, like “digital gold”. This increased scarcity leads speculators to bet on significant Bitcoin price appreciation. Savvy traders aim to ride the volatility and capture profits from the swings tied to the predictable halving timeline. Exchanges provide the perfect platform for users to trade around this anticipated price action actively.

When Scarcity Meets Usability for the Next Crypto Era

The upcoming Bitcoin halving and swelling blockchain adoption signals a breakthrough spring for the entire digital asset industry. Inscriptions add further momentum, seamlessly integrating crypto assets into exchange services to boost transparency and convenience. Their exponential growth trajectory aligns with swelling mainstream interest.

As the Bitcoin ecosystem enters this new era of heightened scarcity and expanding use cases, exchanges embracing compliant and intuitive design are set to flourish. Platforms prioritizing user-centric experiences and institutional accessibility will become the pillars of the next-generation crypto financial system.

The Halving Spotlight Shines on Exchanges

Exchanges can optimize the trading experience by embracing similar minimalism. Streamlining products to emphasize core utilities, while removing unnecessary features, enhances liquidity and accessibility for users. Smoothing onboarding lowers barriers to entry.

Aligning with the crypto industry’s ethos of decentralization and empowerment, CoinEx differentiates itself through a focus on security, simplicity, and superior customer service. Keeping the user experience clean and intuitive, CoinEx eliminates unnecessary features and clutter within its trading products. This minimalist “Less is more” approach makes onboarding seamless for new crypto traders across both retail and institutional partners. Prioritizing mainstream accessibility, CoinEx bridges the gap between the crypto sphere and traditional finance. Its high liquidity across major trading pairs also provides ample flexibility for seasoned traders.

With the market maturing and the virtual asset class solidifying, crypto is poised to embark on an unprecedented bull run. Bitcoin still leads the charge, and its reliable halving cycles continually reset the stage for prolonged growth. Its solid architecture and supply dynamics make it an anchor as the wider industry blossoms.

2. The New Secrets of Successful Bitcoin Miners

Yet, this was not always the case. How did we get here, and where are we going? In the beginning, the puzzles were easy. All you needed was a PC with a standard CPU. Back then, you received 50 Bitcoins (BTC) for successfully adding a block to the network.

The potential value of Bitcoin was not widely recognized. 50 BTC, hardly worth a penny then, is now worth over 2 million USD. Of course, few could foresee the valuation Bitcoin would eventually garner.

Case in point: Laszlo Hanyecz, who bought two pizzas for 10,000 BTC. He claims he has no regrets, but most (understandably) balk at this claim. As demand climbed and competition between miners intensified, basic CPUs would no longer suffice. They were first replaced by GPUs, which could keep the BTC rolling in by bringing more power to the table.

GPUs (Graphics Processing Units) were now quickly cracking the increasingly difficult puzzles posed by the blockchain. This epoch also saw a shift towards communal mining, as mining pools formed to leverage their combined resources to improve their odds of all parties benefiting.

Alongside Bitcoin’s swiftly ascending price, mining would continue to evolve, albeit in a punctuated fashion. Only 2 years after the Genesis Block was added to Bitcoin’s ledger, a third generation of hardware would come, FPGAs.

Field Programmable Gate Arrays (FPGAs) brought more precision, as they allowed hardware and software to be customized to optimize the process. Miners could add custom code to juice up their virtual drill rigs to extract what was now digital gold.

The downside was that the venture became more specialized, expensive, and intensive, a trend that continues up to the present. But with the price of a single Bitcoin at $5 in 2011, it was worth it, even to those who did not anticipate further growth.

The First Halving

The following year would witness BTC’s first halving. Now miners would only earn 25 BTC for adding a block. 2013 would see a watershed innovation with the introduction of Application-Specific Integrated Circuits (ASICs). Unlike their predecessors, they were devised specifically to mine Bitcoin. Unsurprisingly, the network’s hashing power spiked tremendously when ASICs entered the fray.

The advent of ASICs ushered in an ongoing arms race for the latest and greatest. Chip size has steadily decreased, allowing efficiency to escalate. But what about now?

What Is Mining Difficulty? PoW Blockchain Impacts Breakdown

The primary goal of Bitcoin mining is to maintain the integrity and security of the Bitcoin network. Bitcoin mining, or PoW mining, adopts machinery that solves complex cryptographic puzzles to validate transactions before adding a transaction to a blockchain.

The Bitcoin network holds a difficulty adjustment component designed to stabilize a block production rate at one block every 10 minutes, regardless of the total computational power of the network. The Bitcoin difficulty adjustment ensures a predictable issuance of new Bitcoin into the market can be maintained, securing the network at roughly one block every ten minutes.

3. What Is The Mining Difficulty In PoW Blockchains Like Bitcoin?

The mining difficulty in the context of blockchain refers to how hard it is for miners to find a new block compared to the easiest it can ever be. The difficulty adjustment measures how difficult it is to find a hash below a given target.

The “target” in Bitcoin mining refers to a specific value that a valid block’s hash must be, which is less than or equal for the block to be accepted by the network.

How To Calculate Difficulty in Mining?

The target miners need to hit will adjust every 2016 blocks, approximately every two weeks, to ensure that blocks are being mined approximately every 10 minutes.

If mining power (hashrate) increases and blocks are found faster than every 10 minutes, the target value decreases, making it harder to find a valid hash. Conversely, if the hashrate drops, the target increases, making it easier to find a valid hash.

How Is Hash Difficulty Calculated In Blockchain?

After 2016 blocks the Bitcoin network takes the actual time it took to mine these blocks and compares it to the desired time (two weeks).

The difficulty target is then adjusted proportionally to ensure that the time to mine the next 2016 blocks remains close to the ideal two-week period. Essentially, it’s a self-correcting system to maintain a consistent block discovery rate.

Case Study: China Banning Bitcoin Mining In 2021

In May 2021, China banned Bitcoin mining within its borders, leading to a significant drop in Bitcoin’s global network hashrate by more than 50%. The event serves as a case study in understanding the resilience and adaptive nature of Bitcoin’s difficulty adjustment mechanism.

Even though the hash rate dropped 50%, a complete recovery was made when the network’s hash rate surged approximately 113% in just five months, demonstrating Bitcoins robust rebound and why decentralization is powerful.

Simply put, miners left China to go mine elsewhere and were incentivized along with global miners in the process. Bitcoin withstood a nation-state attack of China banning mining, and the network shrugged it off, highlighting the role of Bitcoin’s difficulty adjustment in maintaining network stability and functionality.

What Is The Difference Between Hashrate And Mining Difficulty?

Hashrate refers to the total combined computational power that is being used to mine and process transactions on a blockchain network. Mining difficulty, on the other hand, is a measure of how difficult it is to find a new block. While hashrate is an indication of the network’s processing power, difficulty is an adjustable network parameter that ensures a stable block production rate.

As the hashrate increases or decreases, the difficulty adjusts accordingly to maintain balance as can be seen in the case study above involving China’s ban on Bitcoin mining in 2021.

Conclusion

The mining difficulty in PoW blockchains like Bitcoin plays an important role in maintaining network integrity and stability. Initially set low to incentivize participation, it has evolved significantly over time due to increased miner activity and advancements in technology.

This evolution from basic computing to specialized ASICs reflects the protocol’s adaptability to changing network conditions, ensuring consistent block creation and network security. However, this increasing difficulty has implications for energy consumption and potential centralization, posing challenges and opportunities for future blockchain developments.