In today's fierce competition among digital currencies, Bitcoin has always occupied a dominant position. Its mining cost curve is not only the focus of research, but also a key indicator of the future development of the entire network. According to statistics, Bitcoin’s mining cost curve indicates that after the computing power is halved, the computing power of the entire network may drop by 30%. This information not only affects the profits of miners, but also affects the future development direction of the entire industry. Next, let’s delve into the connotations behind this phenomenon and reveal its mysteries and implications.

In the field of Bitcoin mining, the cost curve has always been a hot topic among researchers. As Bitcoin prices fluctuate and mining difficulty adjusts, miners must constantly adjust their computing power investment to ensure maximum returns. However, this adjustment may have unintended consequences when the computing power of the entire network is halved. Past experience shows that once the computing power drops by 30%, the confirmation speed of the entire network will be significantly affected, and the transaction confirmation time may be significantly extended, or even congestion may occur. This will have a considerable impact on the Bitcoin user experience and market confidence, and in turn affect the stable development of the entire industry.

For miners, changes in the mining cost curve will also directly affect their profitability. As computing power decreases, miners need to invest more resources to obtain the same amount of Bitcoin rewards, which will inevitably reduce their profit margins. In particular, small miners who rely on mining to make a living will face greater pressure to survive. This may also lead to increased consolidation in the mining industry, with large mines making it easier to stand out from the competition, while small miners may face the risk of being eliminated. Therefore, changes in the Bitcoin mining cost curve will trigger a series of changes and adjustments within the industry.

In addition to the impact on miners and the industry as a whole, changes in the Bitcoin mining cost curve may also trigger wider social concerns. With the popularity and social acceptance of Bitcoin, its stability and security have attracted much attention. Once the computing power of the entire network drops significantly, it will not only pose challenges to the security of the network, but may also affect Bitcoin's function as a value store and transaction medium. This will further exacerbate market uncertainty, may cause investor confidence to waver, and even trigger larger market fluctuations.

To sum up, the Bitcoin mining cost curve indicates that the computing power of the entire network may drop by 30% after the halving. This phenomenon not only affects the profitability of miners, but also concerns the future development of the entire industry and society. Stablize. Facing this challenge, we need more research and discussion to find solutions to ensure the stability and sustainable development of the Bitcoin network. Only with the joint efforts of all parties can Bitcoin truly become a safe, stable and reliable digital currency and make greater contributions to the development of the global financial system.

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At the end of 2019, the Bitcoin halving was a major topic of discussion for everyone, and it was no different at the beginning of 2020.
However, with the roller coaster ride of Bitcoin in February and March, the topic of the impact of the halving on the market gradually faded. With only 41 days left before the Bitcoin mining reward halving, BitMEX's research on the mining cost curve reveals the possibility of interesting potential changes in Bitcoin's total network computing power after the halving.

Bitcoin Mining Cost Curve

BitMEX's Bitcoin Mining Research Report is the fourth in the halving series. In the research, BitMEX explored three possible curves for Bitcoin mining costs and compared them with the actual mining cost curve.
The first curve is simple and straightforward, which is a linear mining cost curve, followed by a "normal" mining cost curve and a mining cost exponential growth curve.

After the halving occurs, the Bitcoin mining reward will be halved, and the mining difficulty will most likely remain unchanged.
This is why the research report says that if this happens, the price of Bitcoin will collapse again from $6,000 to $3,000 after the halving.

Source: BitMEX Research

In the first linear Bitcoin mining cost curve (shown above), the green line is the new marginal production cost after the halving, which intersects with the price after the halving ($3,000). Based on these two data points, the total network computing power is expected to drop by 29% after the third Bitcoin halving.

Source: BitMEX Research

Similarly, the second cost curve is the "normal" mining cost curve, showing a 47% drop in total network computing power (hash rate) after the halving. For the third exponential mining curve, the total network computing power hash rate only dropped by 12%.

Since all of these curves are based on theoretical data and it is difficult to obtain actual data on the Bitcoin mining industry, BitMEX Research cites data from a recent research report by Blockware
Solutions, which categorizes the Bitcoin mining industry based on eight different tiers of electricity costs.

BitMEX's research states: "It is difficult to assess the accuracy of the data, but we analyzed the data and came up with the following cost curve. As shown in the figure below, the best fit line (red) is reasonably linear, similar to the case 1 in the above chart." 

As shown in the figure, the data plotted resembles a linear cost curve. But note that this is only based on the consideration that the cost of electricity remains unchanged. 

Research conclusion: 

Information about the revenue of the Bitcoin mining industry is obviously extremely transparent, but the cost structure is somewhat opaque. If Bitcoin succeeds, the Bitcoin mining industry is likely to develop and disclose more information to the public in the long run. Therefore, analysts may conduct extensive research and analysis on the cost curve and make reasonably accurate predictions about the impact of Bitcoin price changes or halving on the network hash rate. 

Therefore, due to the limited information currently available, this report is speculative in nature. However, based on the analysis in this report, it is expected that when the halving occurs, the total network computing power (hash rate) may drop by about 30% to 35%. 

There are many assumptions in our estimates above. We assume that the Bitcoin price has not changed, all miners are rational, and a large part of miners have not yet lost money. Since the halving will definitely bring price fluctuations, it is even impossible to judge whether our methods and calculations are correct. However, we think we have introduced a useful framework for evaluating the Bitcoin mining industry and the halving event.

What impact will the halving have on the Bitcoin mining industry? For miners, of course, it will be a huge pressure. On the other hand, given the actions taken by governments around the world to mitigate the impact of the new crown pneumonia, many other industries will also go through challenging times at the same time.