What Might The Bitcoin Halving Do For You?

It’s a question that I’m sure many Bitocin owners are asking. In around 90 days from now on 8th May, Bitcoin’s mining reward will be cut in half (that’s what a ‘halving’ means) and crypto commentators believe that it could trigger some significant price activity, and boost the BTC price skywards.

Currently there are approximately 18 million Bitcoin in circulation out of a total of 21 million. But, thanks to the halving protocol, this limit won’t be reached in the near future. Satoshi Nakamoto programmed the Bitcoin network protocol so that a halving would take place every four years, or every 210,000 blocks, and cut miners rewards in half. The idea being that this makes producing more coins more difficult.

This may seem counterintuitive, as miners are incentivised by the rewards. As Edith Muthoni, chief editor at Learnbonds.com told Coinrivet: “This brings us into a seeming conundrum: if miners will no longer receive block rewards (or too little), will they continue mining? What will be their motivation to stay on? What does this mean for the network and Bitcoin?”

The impact on Bitcoin mining

Once upon a time people at home could make some money from Bitcoin mining, but that ended some time ago. However, as we approach this halving, there is a serious question to be answered about how the medium and large-sized mining operations will fare.

There are fewer than three million Bitcoin left to mine, and the hash rate is hitting all-time highs. Given the cutting of rewards, it would seem that the effect on mining at least would be negative. Steve Tsou, CEO of RRMine, a Bitcoin cloud mining operation has gloomy view: “The halving in 2020 will have great impacts on Bitcoin miners: 1) Miners with low mining efficiency will be forced to pause and re-evaluate their business operations. 2) Digital mining is becoming the racetrack for giant international companies because they have more advanced machines and cheaper sources of electricity.”

Tsou’s sentiments are echoed by a number of others in the sector, including Alex Lam, one of China’s most prolific miners and CEO of RockX digital assets. He said “The next Bitcoin halving is likely to result in mining profitability decreasing significantly in the short term.”

However, depending on the price of Bitcoin on 8th May, miners’ profitability may not be so dramatically affected, at least in the short term. If the Bitcoin price rises substantially afterwards, then miners may be able to sustain their profits. A price fall, on the other hand, could see some go out of business.

The impact on Bitcoin’s price

Unless you are a miner, how many Bitcoin owners can honestly say that they are concerned about the impact on mining. What they want to know is the halving’s impact on price.

This is not the first time that a halving has occurred. The BTC price stood at $12 when the mining reward was first cut in November 2012, and stood at $652 at the time of the second halving in July 2016. Of course, as you remember, the following year brought us that sensational bull run, driving Bitcoin to $20,000. Weiss Ratings, which analyses the impact of halving’s on price, said: “So, does the Bitcoin halving help drive prices higher? Absolutely. The only question now is how high will #BTC go this time around?”

Jimmy Nguyen, president of the Bitcoin Association commented: “Some people expect the coin price to magically increase before the halving and help cover the 50% fewer coins. Even if there is some price increase, it is doubtful coin prices will double from now through April or May 2020. So mining will most likely be less profitable after the halving than it currently is.”

Ultimately, what we are likely to see when the Bitcoin halving happens is this: it will have a major impact on mining in the short and long term. Furthermore, we’ll see smaller, less sustainable operations give way to larger mining farms with access to low-cost energy.

Miners, like Bitcoin owners, will be hoping for a hike in the Bitcoin price, because that is the key to ensuring profitable mining, as well as profits for investors.

Is Jack Dorsey a Bitcoin hero?

Jack Dorsey is a curious character. The combination of his business success with a somewhat eccentric lifestyle pretty much guarantees media and public interest in him. He may not be as well known as Mark Zuckerberg, but he’s probably more easily identifiable by the public than the Google guys for example. Plus, he does often look as if he might have had a lead role in Pirates of the Caribbean, or some other Hollywood production. However, what in my opinion is most interesting about him is the role he has played in promoting cryptocurrency, particularly Bitcoin.

Dorsey is not only a co-founder of Twitter, he also launched Square, a mobile payments company that is hot on crypto. Dorsey is known to be a massive Bitcoin supporter, and has vowed to help Bitcoin develop as a global currency though Square. However, he is not a Bitcoin bull — he has a diverse crypto portfolio and is always upfront about that. Square’s spokesperson told Forbes, “it’s “only a matter of time until instant, low-fee bitcoin payments are as common as cash used to be.”

And to speed this along, Dorsey’s Square Crypto division is working on a kit that should help to integrate the Lightning Network with Bitcoin wallets. Lightning is a layer-two solution built on top of the Bitcoin network that makes payments faster and cheaper, and speed and cost are key elements of taking Bitcoin mainstream.

Until now there has been a problem with scaling Bitcoin for everyday payments, and this has slowed down adoption. Dorsey wants to supercharge the leading crypto’s throughput, which is why Square announced its Lightning Development Kit (LDK) to coincide with the World Economic Forum in Davos, although it was definitely no coincidence.

As Gerelyn Terzo writes at CCN, “What Dorsey’s crypto division plans to do is give developers greater flexibility with Bitcoin and Lightning technology that in a nutshell comes down to streamlining bitcoin wallets.”

Essentially, the Lightning Network can potentially process millions of transactions per second, which is massive compared with Visa’s 45,000 transactions per second.

Dorsey deal with the volatility issue

Improving the speed and cost of Bitcoin transactions is one thing, but merchants are reluctant to accept the cryptocurrency because of its volatility. Dorsey and Square have a solution for that as well.

Square has been granted a patent that enables users to conduct fiat-to-crypto transactions. The customer can pay in bitcoin and the merchant can instantly convert it to U.S. dollar or any currency.

Basically, Dorsey is laying the foundations of an infrastructure for widespread Bitcoin use, because with instantaneous payments that can be converted into any currency, both customers and merchants have no reason to deny Bitcoin as a payment option.

If Dorsey and Square achieve this, they will surely be hailed as Bitcoin heroes. Unless you’re a Bitcoin hater!

 

Winklevoss twins tell Wall St to wake up

Winklevoss is a big name in the crypto world. The twins, who were Facebook co-founders, have been advocating for cryptocurrency for many years now, and have built up a considerable bitcoin holding, as well as founding the Gemini crypto exchange.

In the last couple of weeks, bitcoin has risen above $10,000 and dipped below it, but overall this year its value has climbed by 200%, giving hope to the crypto bulls, who were left out in the cold during the bear market of 2018.

Enter the Winklevoss twins, who have now warned Wall St banks that they have been “asleep at the wheel” when it comes to bitcoin and cryptocurrencies generally.

“Unlike the internet, which you couldn’t buy a piece of, you can actually buy a piece of this new internet of money,” Tyler and Cameron Winklevoss told CNN. They added, “It’s still a retail-driven market, from day one. And a lot of people have done really well. Wall Street has been asleep at the wheel.”

As Billy Bambrough at Forbes comments: “Bitcoin’s epic 2017 bull run, which saw the bitcoin price soar from under $1,000 per bitcoin at the beginning of the year to almost $20,000 in December, was largely thought to be due to Wall Street and that institutional investment could be poised to flow into bitcoin and crypto.”

However, the institutional investment didn’t materialise and the price of bitcoin crashed. The Winklevoss twins took a different approach, “We had to invest because we were afraid of missing out, we couldn’t miss out on this future.”

It appears they are now lobbying the Wall St banks to become more involved with the aim of seeing that institutional investment emerge this year, even if it didn’t appear in 2017.

Bambrough suggests that in some ways keeping the banks outside the market has helped bitcoin retail investors, and he cites teen bitcoin millionaire Eric Finman as an example. Finman recently announced that he is backing Metal, which launched in 2017, but has been revamped as a “all-in-one digital banking platform for cryptocurrency” — despite slumping 98% in value since its all-time high. Finman’s support comes as Metal Pay relaunches to compete with more directly with the likes of Venmo and PayPal, payment platforms that want users to store and send cash on their apps.

Meanwhile, Tyler and Cameron Winklevoss said they are open to partnering with Facebook chief executive Mark Zuckerberg on the social media giant’s Libra cryptocurrency project after it was revealed they have been in talks about joining the Libra Association.

The banks may appear to be losing out in this emerging market; it may even make banks a thing of the past. But there is a way to go before we’ll see that, even if these institutions are slumbering giants.

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