Computing power on the Bitcoin network, known as hashrate, could drop by as much as 30% as unprofitable miners shut off their rigs after the next halving event, expected in April 2024, experts said in a Twitter Spaces on Wednesday hosted by CoinDesk as part of its Mining Week 2023.
Lucas Pipes, Managing Director at investment bank B. Riley Financial, estimated a 15% to 30% decline in Bitcoin’s hashrate. Colin Harper, head of content at mining services firm Luxor Mining, said a 20% drop was possible.
Roughly every four years, the bitcoin rewards the miners receive for successfully mining a block are cut in half in a way of controlling the blockchain’s supply economics. This event is known as the halving. The next halving will lower the reward to 3.125 BTC per block from the current 6.25 BTC.
As the rewards get cut in half, the cost to mine a block successfully doubles. Barring major upward swings in bitcoin’s price, this would lead to miners that are not profitable to shut off their machines and, in turn, lower hashrates for the network.
To this end, the miners have been trying to upgrade their fleets to newer generation machines, which require less power to mine a block successfully. Power costs are usually miners’ biggest operational expenditure, so minimizing this costs is the key to surviving the halving.
The hashrate has been increasing in the past year as more machines are coming online. Meanwhile, the efficiency of machines has roughly doubled every five years.
