BTC’s Halving Event Could Create Huge Security Issues

BTC’s halving event could create even bigger problems for the network than what there is already there since the security largely depends on block rewards and not transaction fees. How can the fees alone be enough to sustain the network if the halving continues to erode the miner revenues? Let’s find out in the Bitcoin news updates below.

Bitcoin’s network hashrate, the sum of all of the mining devices that are operating at any given time, should not be analyzed simply under an umbrella of terms. The cost and hashing efficiency of these devices can vary by many of the orders of the magnitude which impacts the cost of conducting a 51 percent attack.

When bitcoin was only created, mining could be done only on home computers and today, the extremely efficient application-specific integrated chips are the ones responsible for virtually all of the network’s hashrate. The difference is astounding since high performing CPU in 2013 could mine at a speed of 64 Megahashes per second while the new ASICs mine at 53 terahashes per second. A bigger increase in the network’s hashrate generally happens for two reasons, to increase Bitcoin’s price to advance in the ASIC technology. In both ways, the increases keep on rising until they reach a new economic equilibrium defined by the profitability of the most efficient machine.

As the block reward continues to halve, more of the network’s security will depend on fees. When the block rewards stop entirely, the network will have to run entirely on transaction fees unless something dramatic changes to the Bitcoin code. BTC’s halving event can, therefore, prove problematic. The daily revenue from the fees reaches up to $350,000 or about 2 percent of the daily block reward revenue of $15.8 million. As the block reward halving stops, the fees will have to increase by 22 times to cover the shortfall in revenue or the hashrate will drop and the security of the network will decrease.

Back in 2017, the Bitcoin hashrate reached up to 10 Exahashes per second or about 740,000 Bitmain S9s worth $1.5 billion. If Bitcoin were to halve today, it will have to be even more secure than when it halved when the price was at $20,000.