The Bitcoin Cash mining network is reportedly a ghost town, with something like 50% of its total hashpower exiting almost immediately after the cryptocurrency’s “halvening.”
Let’s Go Halves
The halvening is when the reward for finding a new Bitcoin block drops by half. Several other cryptocurrencies, including Litecoin and Bitcoin Cash, use the same strategy to maintain a deflationary supply schedule.
Bitcoin Cash and Bitcoin SV have both reached their 3rd halvening ahead of Bitcoin. The “four year” schedule for Bitcoin reward halvening, set in stone by Satoshi Nakamoto himself, is only an estimate. Miners occasionally find two blocks back to back, and in networks with lower hashrates, like BCH and BSV, this is the case often enough. Sometimes one can wait up to two hours for BCH miners to find a block, as a result of the way the algorithm responds to finding more than one block in a ten minute interval.
It only makes sense that miners would have left BCH. Mining often has a razor-thin margin, especially with altcoins, and nearby Bitcoin, which is completely compatible with all Bitcoin Cash mining equipment, hasn’t halved yet. So a short-term strategy for miners is obvious: move to Bitcoin and hope for the best.
As Mark Hunter reported, the halving has affected both Bitcoin SV and Bitcoin Cash. CoinGeek reportedly pulled all their mining equipment from the former’s chain. Erstwhile even Roger Ver’s pool stopped mining Bitcoin Cash.
Bitcoin Variant Miners Seek Shelter in BTC
As you can see in the below chart, both BSV and BCH took a massive dive of at least 50% (over 1 exahash) while Bitcoin saw a mild spike.
Which raises an important question: will Bitcoin follow the same path?
Well, it’s possible. And the market could be flooded with used mining equipment, creating an interesting new paradigm.
It seems for now, non-Bitcoin miners will continue to mine on Bitcoin until it’s halvening. If we see a 50% drop from there, it’s much more extreme. But that’s not the only reason to be concerned.
What If A Government Buys Up The Bitcoin Mining Network?
Let’s look at this from a nuts and bolts perspective.
We know how Bitcoin works, presumably. Whoever has the most hash and the longest chain wins. We also know that mining is going to become less profitable within a month, as the market won’t immediately correct itself. It may correct long-term, but we’ve discussed this at length: there’s just no way to be sure.
Now if we assume that Bitcoin will follow the same path as Bitcoin Cash and Bitcoin SV, and miners will exit in droves, then we know what happens next: equipment goes up for sale.
Now introduce a bad actor with deep pockets. How hard would it really be for him to buy up acres of mining equipment and take over the Bitcoin network?
A lot harder than it seems, surely. Studies have determined that no single government would be capable of doing so under normal circumstances. But combined with the income problems brought on by Coronavirus, the possibility of billions of dollars in mining equipment getting liquidated to a single party seems real.
But, we can assume there would be a lot of things developers and companies could do to prevent a full-scale takeover. Developer Luke-Jr has long suggested that an algorithm change is possible.
Then there is the simpler question: is a fixed supply truly possible? Bitcoin is going to begin testing this more and more in the coming years. Monero decided it’s not possible, and has a “long-tail emission” in its algorithm. This means that once mining rewards run out, miners will still have a stipend with every block, plus transaction fees.
Whatever happens, things won’t be the same in June.
