What does the halving of Bitcoin's block reward mean?
There are two main implications to consider. The first is that the price of Bitcoin may increase. The second is that if the price does not increase, the security of the network may decrease.
Referring to classical economic theory, many people believe that the price of Bitcoin should increase because the supply of Bitcoin on the market has decreased:
Currently, miners receive about 1,800 new Bitcoins per day. Selling at $61,000. - This means a daily reward of $1,098,000,000,000.
Miners use tons of electricity to process transactions, and the usual assumption is that miners sell their newly minted Bitcoins directly to cover costs. This would mean that after the halving, instead of 1,800 Bitcoins per day, only 900 Bitcoins would be freshly supplied to the market. This scarcity is believed to have a positive impact on the price of Bitcoin.
If the price of Bitcoin does not increase after the block reward is halved, miners' income in US dollars will decrease. This means that they will have a harder time recovering their costs, which will drive miners with the highest electricity costs out of the market first. The reduced electricity consumption to maintain the network means that the difficulty of processing large transactions will decrease. In theory, this means it will be easier to attack a blockchain network and create a 51% attack.
