Bitcoin and Bitcoin Cash: The Dual Challenges of Mining Reward Halving

With the rapid development of digital currencies, Bitcoin and Bitcoin Cash, as the leaders among them, have attracted the attention of countless investors and miners. In recent years, as the difficulty of mining continues to increase, the mining rewards of these two digital currencies are about to be halved. This change will not only have a direct impact on the income of miners, but will also have a far-reaching impact on the entire market ecosystem. This article will deeply explore the background, impact and future trends of the halving of mining rewards for Bitcoin and Bitcoin Cash.

In the world of digital currencies, mining is not only a way to earn revenue, but also a key mechanism for maintaining network security and transaction verification. Bitcoin was originally designed to control inflation by gradually reducing the issuance of new bitcoins, and the generation of every 210,000 blocks will result in a halving of mining rewards. This mechanism gradually increases the scarcity of Bitcoin, thereby increasing its value. Bitcoin Cash, as a fork of Bitcoin, also follows a similar halving mechanism. As the mining difficulty of these two currencies continues to increase, miners face greater challenges.

First, the increase in mining difficulty means that miners need to invest more computing resources and electricity to obtain the same amount of Bitcoin or Bitcoin Cash. According to data, the current difficulty of Bitcoin mining has reached a historical high. In order to obtain higher returns, miners have upgraded their hardware and increased computing power. This trend has not only raised the threshold for mining, but also intensified market competition. Faced with high equipment and electricity costs, many small miners have been gradually forced to withdraw from the market, leaving behind large and powerful mining pools.

In this context, the arrival of the halving of mining rewards will undoubtedly intensify this competition. Miners' income will decrease, especially small miners who rely on low-cost electricity will face greater survival pressure. Taking the electricity cost in some areas as an example, assuming that the electricity cost is $0.05 per kilowatt-hour, and an efficient mining machine consumes 1 kilowatt of electricity per hour, the electricity cost per hour for miners will reach $0.05. If the mining reward is halved, the income of miners will be directly affected, which may lead to reduced profitability or even losses.

At the same time, the halving of mining rewards will have a profound impact on the supply and demand relationship in the market. Generally speaking, the halving will lead to a decrease in the number of newly issued Bitcoin and Bitcoin Cash in the market, thereby driving up their prices. Historical data shows that after each halving of Bitcoin, the price has risen significantly. For example, after the halving in 2016, the price of Bitcoin rose from about $450 to nearly $20,000 at the end of 2017. Although the market is always volatile, this pattern provides an important reference for investors.

However, the market's reaction is not always so simple. The halving of Bitcoin Cash also faces fluctuations in market sentiment. As Bitcoin's "brother", Bitcoin Cash has relatively narrow market acceptance and usage scenarios, and its price fluctuations may be more drastic. For example, in 2018, the price of Bitcoin Cash fell sharply on the eve of the halving, and many investors chose to sell because of concerns about the market's reaction. This phenomenon reminds us that although the halving is generally regarded as good news, market expectations and psychological factors cannot be ignored.

When discussing the future of Bitcoin and Bitcoin Cash, we have to mention its technical evolution. The Bitcoin network is constantly undergoing technical upgrades to increase transaction speed and reduce handling fees, factors that will directly affect the profit model of miners. Bitcoin's Lightning Network is a typical example, which significantly improves transaction efficiency through off-chain transactions. In contrast, Bitcoin Cash excels in transaction confirmation speed and handling fees, which makes it more advantageous in daily small payments.

It is foreseeable that as technology continues to develop, miners' profit models will also adjust accordingly. In the future, miners may rely more on transaction fee income rather than just block rewards. According to some research forecasts, Bitcoin transaction fees may account for a large part of miners' income in the future. This shift will prompt miners to pay more attention to network usage and transaction volume, thus affecting their mining strategies.

From a macroeconomic perspective, the halving of Bitcoin and Bitcoin Cash may also have a profound impact on the entire financial market. As more and more investors pay attention to digital currencies, traditional financial institutions have also begun to gradually intervene in this field. Take Grayscale Investments in the United States as an example. The Bitcoin Trust Fund it launched has attracted the attention of a large number of institutional investors. At the same time, more and more countries are beginning to consider formulating laws and regulations related to digital currencies to meet the needs of this emerging market.

In this context, the halving of digital currencies is not only a technical challenge, but also a profound impact on the global economic structure. In the future, as digital currencies become more popular and accepted, the traditional financial system may face a reshuffle. The halving of Bitcoin and Bitcoin Cash will become one of the important factors driving this change.

At the individual investor level, facing the upcoming mining reward halving, many people have begun to re-examine their investment strategies. How to stay calm in a volatile market and how to adjust the investment portfolio in the face of reduced returns are issues that every investor needs to think about. Drawing on historical experience, investors should pay more attention to risk management and allocate assets reasonably on the eve of halving to cope with possible market fluctuations in the future.

Finally, with the halving of mining rewards for Bitcoin and Bitcoin Cash, the future of digital currencies is full of uncertainty. This change is not only the focus of miners and investors, but also the object of deep thinking for financial market participants. In the context of continuous technological advancement and market changes, only by adapting to the trend of the times and flexibly adjusting strategies can we remain invincible in this challenging field.

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The mining rewards for Bitcoin and Bitcoin Cash are likely to halve at the same time as the difficulty increases. Despite the initial differences in mining rates between Bitcoin and its forks, the increase in Bitcoin’s hashrate has been steadily shrinking the supply of Bitcoin.
If Bitcoin hashrate continues to lead Bitcoin Cash, then both may halve at the same time.
Incredible Bitcoin Cash Mining Rates Leave Bitcoin in the Dust
Since its launch in 2017, Bitcoin
Cash has been struggling to maintain the 10-minute block generation time inherited from Bitcoin. The goal of the fork has always been to maintain the same difficulty and speed as the original Bitcoin, and BCH developers have implemented several different algorithms to achieve this goal.
First, Bitcoin and Bitcoin Cash use a Difficulty Adjustment Algorithm (DAA) that adjusts mining difficulty parameters every 2016 blocks. However, Bitcoin Cash has implemented another algorithm besides DAA since 2017. The Emergency Difficulty Adjustment (EDA) is designed to reduce Bitcoin Cash's mining difficulty by 20% if fewer than 6 blocks are mined in a 12-hour period. However, the introduction of the EDA caused major problems for Bitcoin Cash mining, which put it hundreds of thousands of blocks ahead of Bitcoin. Even after the changes to remove the EDA and implement the DAA, the difference in block numbers remains. The overall growth in block numbers, mining speed, and hashrate means that Bitcoin Cash is scheduled to halve a month earlier than Bitcoin.
The recent increase in Bitcoin hashrate means that Bitcoin has the potential to surpass Bitcoin Cash in terms of rate
Co-founder of Coinmetrics.io and Castle Island
Nick Carter, a partner at Bitcoin Ventures, recently pointed out these issues in a series of tweets on July 14. Carter said that Bitcoin mining rates have been lagging behind Bitcoin Cash, which mined 123,000 more coins than the original Bitcoin block in November 2017. However, the increase in Bitcoin’s hashrate has managed to narrow that difference to 73,000 coins this month.
Carter noted that the difference in the number of coins mined in each network can also be expressed as “a few days ahead” in the issuance schedule.
The difference between the Bitcoin Cash and Bitcoin halvings has been steadily decreasing since 2017, with Bitcoin Cash only 41 days ahead.
Carter said that if Bitcoin continues to shrink its supply by 239 BTC per day, it will continue to surpass the existing difficulty and the Bitcoin and Bitcoin Cash halvings may occur at the same time.
While this will only happen if Bitcoin’s hashrate continues to grow at the same rate it has been since 2017, even a small drop in BCH “over the next few days” would show how much the Bitcoin network is growing organically.

With the upcoming halving of Bitcoin and Bitcoin Cash, the future of digital currency will usher in new opportunities and challenges. Whether it is miners, investors, or ordinary users, they should maintain keen insight and actively respond to the upcoming changes. In this era full of change and innovation, only by constantly learning and adapting can we gain a foothold in the wave of digital currency.