Author: Melvin Carvalho 2014-10-25 22:42:14
Published on: 2014-10-25T22:42:14+00:00
On October 25th, 2014, Alex Mizrahi wrote on the Bitcoin-development mailing list about the possibility of "death by halving," referring to the impact that reward halving may have on miners' income margins. He suggested a simple model where miner's income margin (MIM) is defined as (R-C_e)/R, with R being the total revenue a miner receives over a period of time and C_e being the cost of electricity spent on mining over the same period of time. If MIM is less than 0.5 before subsidy halving and bitcoin and electricity prices stay the same, then mining is no longer profitable after halving. Ross Nicoll responded to this stating that it's hard to find comparables to Dogecoin's mining schedule and that comparing Dogecoin to BTC may be like comparing apples and oranges. He also mentioned that miners do not all move or shut down at the same time, and newer hardware runs much faster, which can push the hashrate back up again within a sensible timeframe.The security model for Bitcoin relies on the assumption that a malicious actor cannot acquire more than 50% of the network's current hash power. However, if the attacker-controlled hash rate is higher than 50%, attacks become virtually costless. The article also discusses how changes in difficulty and equipment efficiency can impact mining profitability and hash power. The article concludes by stating that while reward halving is a deficiency in Bitcoin's design, there is hope that it won't be critical, as hash power drop is less than 50% in an equilibrium break-even situation. The worst-case situation is when before-halving MIM is close to zero and mining devices are nearly identical, in which case approximately half of all hash power will drop out.
Updated on: 2023-06-09T03:29:30.994034+00:00