Mining through Bitcoin Halving: Survival Strategy for 2024

Bitcoin’s fourth halving event is scheduled to take place on April 22nd at event block height 840,000. Each block containing executed transactions is stamped with a block height when mined, indicating how many blocks were created before the latest block.

In this way, block height creates a chronologically ordered digital ledger, giving Bitcoin decentralized transparency and security against double spending. It also plays a key role in applying the built-in halving logic to the entire Bitcoin network, which occurs every 210,000 blocks.

Bitcoin halving exists as an algorithmic monetary policy. Unlike arbitrary central banks, halving predictably controls the influx of new Bitcoin (inflation) by halving miner BTC rewards. The first Genesis block in 2009 delivered 50 BTC to miners. After the fourth halving, miners will receive 3.125 BTC per block mined.

This stark difference in rewards translates to Bitcoin’s inflation rate. From over 1,000% to the current 1.7%, Bitcoin’s inflation rate will be halved once again. And as the amount of BTC available in supply decreases, the value of each Bitcoin becomes higher.

However, Bitcoin halving is just one of many factors affecting BTC price. One of the most serious halving impacts is on Bitcoin mining profitability. If BTC rewards drop too low, will struggling mining companies sell their BTC? So won’t selling pressure suppress the BTC price?

Understanding Halving and Its Impact on Miners

To understand the importance of something, it’s best to imagine it not being there. In the case of the Bitcoin halving, without the halving, all 21 million BTC would have been immediately available upon Bitcoin mainnet launch.

Conversely, this would significantly reduce BTC scarcity, especially considering its novel proof of concept as an initially unproven digital asset. After three halvings, Bitcoin scarcity has proven to be a successful bulwark against fiat currency declines as central banks manipulate their respective money supplies. In other words, the halving accelerated Bitcoin supply and demand dynamics, allowing adoption to unfold.

And as Bitcoin adoption grows, Bitcoin mining networks become more secure. The reason is that as there are more Bitcoin miners, the difficulty of Bitcoin mining increases. This difficulty level is automatically adjusted every two weeks. Bitcoin halvings typically bring multiple benefits before and after the halving, as supply and demand dynamics reorganize.

Similarly, the purpose of Bitcoin mining difficulty is to regulate the rate at which new blocks of transactions are added to the network (~10 minutes) every 2016 blocks. Without this mechanism, the Bitcoin mainnet would become less secure as miners would have difficulty participating.

Profitability is automatically modified due to Bitcoin mining difficulty. If too many miners pull the plug, the difficulty will drop, making it more profitable to mine regardless of the cut reward. As more miners join the network, the difficulty increases, making network security less profitable (computing power hash rate).

However, this is offset by the BTC price rising over time due to insufficient supply. If BTC mining rewards are halved, miners take a hit to their profitability. If mining difficulty does not decrease, we will need to reinvest in operational upgrades to become more cost-effective. Therefore, these mining cycles are called accumulation and surrender periods.

Ultimately, Bitcoin miners need to think carefully beforehand. Rather than overextending yourself in the expansion/debt department, rely on BTC price appreciation to get you through the halving.

Challenges for Bitcoin miners after halving in 2024

As of March 26, the total hash rate of the Bitcoin network is 614.6 million TH/s, or 614.6 EH/s. Bitcoin mining revenue per TH/s is: $0.10. To put this into context, Bitmain’s latest mining rig, the Antminer S21, costs around $4,500 and produces a hash rate of 188TH/s while consuming 3500W worth of power.

Some machines, such as the Antminer S21 Hyd 335T, are much more powerful and expensive. For the cost of these machines, miners must calculate the cost of electricity, cooling, maintenance, debt interest payments and the cost of the facility itself. A company that cannot perform this balancing act will go bankrupt. core science In 2022.

For individuals using regular PCs and laptops, Bitcoin mining has long been unprofitable. They will need to invest in specialized ASIC machines to combat the increasing difficulty of Bitcoin mining and the resulting increase in energy costs. The USG, which relies on central banks and currency devaluation, knows this well.

In late January, the Energy Information Administration (EIA) began exploring ways to disrupt miners’ operations. by Request required survey data For energy consumption, EIA forwards its results to the Department of Energy (DoE) to enact limiting policies.

Swift legal action from the Texas Blockchain Council (TBC) and Riot has now halted this action. Submitted on March 2nd.

Technological advancements and increased efficiency

Bitcoin’s proof-of-work is a critical component of BTC’s value. This allows digital assets to be anchored to physical reality through energy consumption and hardware assets. Otherwise, multiple cryptocurrencies could be created at low cost, creating noise in valuation.

However, just as energy consumption is Bitcoin’s strength, it is also its weakness from a political perspective. For example, Elon Musk canceled Tesla’s Bitcoin payments in May 2021, causing a major crash. Since then, Bitcoin mining has gone green. 54.5% of energy From sustainable sources.

In addition to using renewable hydropower, such as Norway’s Kryptovault, Bitcoin miners can put surplus heat to good use. For example, Kryptovault introduces this hot air to dry chopped logs for the lumber industry. Many small mining operators have taken this approach to heating their homes.

How to heat your whole house #Bitcoin mining pic.twitter.com/470jJ7PSGW

— ₿itcoin 📄 Documenting (@DocumentingBTC) December 28, 2022

Other miners, such as Crusoe Energy Systems, used surplus gas to connect their operations to oil and natural drilling wells rather than setting wasteful fires. On a larger scale, Bitcoin miners also help balance the power grid, as the now-deceased ERCOT CEO Brad Jones noted.

that much #Bitcoin The energy debate is over.

Brad Jones, head of the Texas grid, explains:#Bitcoin Mining is helping balance our power grid and supplying more renewable energy to our system.”pic.twitter.com/kGYwAkOVv8

— ₿itcoin 📄 Documenting (@DocumentingBTC) March 5, 2023

High-end Bitcoin miners are turning to nuclear energy, the densest and greenest form of energy. TeraWulf has begun construction. Nautilus Cryptomine The facility was established as the first nuclear-powered Bitcoin mining operation. At a cost of 2 cents per KW/h, TeraWulf strives to be the most cost-effective miner in the world.

A lot is expected in the next halving. hydrogen The infrastructure is suboptimal for nuclear power. However, the most common path to cost efficiency still involves pooling resources. mining pool.

What to Expect from the Post-Half-Life Outlook

Bitcoin, which acts as a foil for currency depreciation, also presents opportunities for miners. They are buying time with their debt to upgrade in the hope that the rising BTC price will allow them to pay it off. The problem is that only prepared miners with modern equipment and favorable energy costs can survive.

After all, it is they who increase the difficulty of Bitcoin mining. Anyone who can’t compete will leave the network, and the network difficulty will automatically adjust, making your competitors’ job easier. According to Luxor’s base case, 3% of Bitcoin miners could leave the network in a scenario where the BTC price remains within the $66,000 – $66,000 range.

As well as, Luxor Project Bitcoin is unlikely to reach 725EH/s by the end of the year. This will flatten the hash price to $53/PH/day after the halving, consistent with the flat case hash price prediction.

The current break-even hash price is $37.20/PH/day, excluding firmware upgrades. other companies like blockware solutionUsing the 2020 halving as a benchmark, where the hash rate increased 30% by the end of the year, we expect the hash rate to reach up to 670 EH/s by the end of the year.

With this in mind, Bitcoin miners should plan for long-term scalability, such as TerraWulf’s nuclear investment. In the meantime, miners can take advantage of the following to hedge against uncertainty: Bitcoin Derivatives.

For example, there are currently several trading platforms that offer exchange futures as a mechanism for preselling mining productivity. Just like traditional markets where commodities are traded, miners can use this strategy to protect against BTC price fluctuations.

And recurring revenue streams can help reduce spikes in operating costs. Likewise, Bitcoin mining companies can diversify and offer cloud mining services with enhanced features. cloud security.

conclusion

When all factors are taken into account, Bitcoin is a marvel of both software engineering and economic theory. It turns out that it is possible to enact monetary policies and incentives without resorting to direct centralized manipulation.

Bitcoin miners play a key role in this digital enactment. They must resort to the Darwinian game of survival of the fittest, but the unknown is less prevalent. Because there are three half-lives, predictive data can be leveraged.

The only question remains: Which Bitcoin miners have adjusted their financial modeling to the worst case scenario of a downside?