The halving date is imminent, and large mining pools say they are not under any pressure

The second Bitcoin block halving is coming. This week, three quarters of Bitcoin will be mined, and the block reward will be reduced from the original 25 BTC/block to 12.5 BTC/block. This is an important time in the history of Bitcoin development, and the community is looking forward to it, but also a little panicked.

Bitcoin miners will be most directly affected by the halving day. Because creating blocks is their job, and block rewards are their main source of income. Bitcoin Magazine interviewed several large mining pools about their views on the halving day and learned about their responses. The interviewees included BTCC COO Miao Yongquan, BitFury CEO Valery Vavilov, AntPool's Wu Jihan, Genesis Mining CFO Marco Krohn, HaoBTC Overseas Market Director Mou Xiaoliang, and Slush Pool Architect Marek Palatinus.

Stay optimistic

All miners interviewed by Bitcoin Magazine expressed a positive attitude towards the upcoming halving date. Although the block reward halving will affect their source of income, they believe that the price of Bitcoin will rise.

Wu, co-founder of Chinese mining machine manufacturer Bitmain and operator of AntPool, the world's second-largest mining pool, controls about 20% of the network's computing power. Wu also agrees that Bitcoin prices will rise after the halving. Bitcoin's monetary policy may not be perfect, but it always keeps its word. Delivery commitments are the Achilles' heel of monetary authorities or central banks. I think the halving will have a positive impact on Bitcoin prices because it reduces supply. Although rational analysis does not necessarily lead to price increases, we can see some clues from market participation.

HaoBTC is a Chinese mining pool and wallet provider, representing 3% of the total network computing power. Its overseas marketing director Mou Xiaoliang believes that the limited supply of Bitcoin is indeed a major selling point. The mining industry still has a very bright future. The main factor that attracts me to Bitcoin is its limited supply. This factor, combined with the four-year halving system, shows that the Bitcoin network is completely out of human control, at least not like fiat currencies, which are always at the mercy of politicians. I recently spent a few weeks in western China, mainly in Sichuan and Xinjiang. I felt that everyone was positive and optimistic, and everything was going according to plan. No one told me that they were troubled by the halving. Of course, I can't have spoken to everyone in the mining industry, so maybe my statement is not comprehensive enough.

Krohn, co-founder and CFO of cloud mining service provider Genesis Mining, expressed doubts about the continued rise in the price of the currency after the halving, but he is still very optimistic about the prospects of Bitcoin. The general situation after the halving is as follows: due to the gradual reduction in supply, the demand for Bitcoin increases, which will eventually lead to price increases. This statement seems to be fine at first glance, but it ignores one point, that is, everyone knows the halving date, and similarly, the prediction of price increases is also well known. In order to make a profit from the price difference, speculators will start to increase their Bitcoin reserves before the halving. Perhaps this is the reason for the surge in Bitcoin at the end of May.

risk

Although the majority of people are positive, some have expressed concerns about the halving day, including Coinbase CEO Brian Armstrong, some Bitcoin Core developers, and other experts who are worried that the block reward halving may drive away some miners.

This situation can easily lead to a sharp drop in computing power, and then the transaction confirmation time will increase. Judging from the current network capacity, as the number of blocks increases, network congestion will occur frequently. Worse, network congestion will endanger the quality of user experience. More and more users will choose to sell their bitcoins, which will only lower the price of bitcoin and reduce the income of miners, which will eventually lead to the bankruptcy of a large number of mining companies, forming a death spiral.

Several miners interviewed by Bitcoin Magazine haven’t thought about this issue in detail, but they said they don’t need to worry too much.

Krohn said: We think the range of the decline in computing power is not large, at most 10% to 25%. Because the validity period of electricity contracts has increased. If the contract does not expire before the end of the month, then you will not stop mining until at least the end of the month. Similarly, another key point to achieve mining is the investment in hardware. Miners have long known about the existence of the halving date, so they will definitely upgrade their mining equipment at least 6 months before the halving date. The fact is that the investment in mining machines has indeed increased over the past year. Even now, mining machine manufacturers continue to launch new equipment and are very popular. To give another similar example, when Litecoin halved in August 2015, the computing power of the entire network was hardly affected.

Krohn also refuted the above-mentioned "death spiral" argument: The "death spiral" argument makes some sense. A sharp drop in computing power will indeed cause block congestion. But as I have said, the computing power will not drop significantly, and the congestion will not be that serious. Block congestion is indeed a bit annoying, but from another perspective, Bitcoin holders have long been aware of the impact of halving, so they will not easily sell their Bitcoin. In addition, the computing power difficulty will be adjusted two or three weeks after the halving day, and then everything will be on track.

Slush Pool accounts for 5% of the total network computing power. Palatinus said they are not worried. Since last year, the price of Bitcoin has been on an upward trend, so he believes that miners do not need to worry too much. I think halving is not a problem at all. The potential value of Bitcoin has been reflected in the recent price trend.

Mou Xiaoliang of HaoBTC believes there is no need to worry. He said that the network's computing power has been rising since last month and this situation will continue.

When I was in western China, I saw several mining companies in preparation. Recently, several foreign mining experts contacted me and said they wanted to open mining companies in China. From my personal experience, unless large mining companies refuse to update their equipment, the computing power will not drop at all.