How will the Bitcoin halving impact Bitcoin L2s?
The Bitcoin halving is anticipated to occur in the second half of April this year. Like real-world gold, bitcoin is considered by many to be “digital gold,” with a maximum supply of 21 million coins. As the Bitcoin halving draws near, many are concerned that miners will endure an inevitable revenue cut following the major event.
Mining bitcoin has previously been a profitable way for people to earn rewards while simultaneously securing the network. Fisher Yu is the co-founder of Babylon, a project aiming to create a Bitcoin-secured proof-of-stake economy. He noted the motivation behind early participation in Bitcoin’s proof-of-work security, attributing it to the high amount of bitcoin rewards available when the blockchain was first created.
“Nakamoto’s hope is that, over time, Bitcoin becomes very well adopted so that the increase in transaction fee will outrun the reduction in mining rewards, so that miners’ operational costs are well covered,” Yu said.
Although such a trend is observed, Yu notes that existing transaction fees are not quite sufficient, and there are growing concerns that miners may leave the network, reducing the blockchain’s overall security.
This belief is shared by Max Chamberlin, the founder of fiat-to-crypto on and off-ramp payments provider Bifinity, who noted that many bitcoin mining businesses could become unsustainable following the halving.
“While bitcoin’s mining difficulty is dynamic, automatically adjusting to the current hash rate capabilities, it would still be better for the network’s decentralization to have as many miners as possible,” Chamberlin said.
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