Bitcoin halvings, which occur every four years, have a significant impact on miners and the blockchain. As the block rewards decrease with each halving, it becomes harder for miners to earn the same level of income as before. The recent halving in May 2020 reduced the block rewards to 6.25 BTC every 10 minutes, and future halvings will further diminish the rewards.
The diminishing block rewards will lead to a shortage of Bitcoin in the market. While the decreased supply may drive up the value of the cryptocurrency, it also means that miners will need to rely more on transaction fees as a source of income. This could potentially lead to an increase in transaction fees for larger transfers, which in turn may impact decentralization.
The next halving is expected in April 2024, reducing the block rewards to 3.125 BTC every 10 minutes. These reductions will continue every four years, ultimately leading to a significant decrease in rewards for miners. By 2052, miners may receive as little as 0.0244140625 BTC per block, significantly impacting their income.
As the supply diminishes, it will become increasingly expensive for miners to keep up with the costs of electricity and hardware updates. While Bitcoin’s price rises have countered the impact of previous halvings, the reliance on transaction fees for income emphasizes the need for miners to keep their costs low. The 2024 halving presents unique challenges, occurring alongside the launch of Bitcoin ETFs in the U.S. and a surge in investor interest.
This means that miners will need to adapt to the changing market landscape and find ways to remain financially viable in the face of diminishing block rewards.