Bitcoin may lose 70% of its miners in a years time. The trend is expected to hit due to the halving event that will occur in 2020. This estimate is based on the projected losses that the miners may face due to increased loads but decreased profits.
The halving event is little more than 300 days away and lends itself to the already complicated situation with cryptocurrencies all over the world. The miners, who are expected to lose money due to increased expenditure and lesser profits, will be forced to make a choice; stick it out or jump ship. This may also slightly affect the value of the cryptocurrency.
The halving event is a part of the Bitcoin protocol. It is built into the cryptocurrency to enable it to gradually move away from the system of rewards that made mining bitcoin lucrative. The idea by the creators of bitcoin was to make provisions for a time when bitcoin would be adopted worldwide. The closer the crypto got to that situation, the incentive to mine would be reduced. They did this by putting in place the “Halving event”.
Bitcoin works on a Blockchain. That means that every time there is some change via a transaction, the event is recorded in a series of blocks, each connected to the previous one. To add a block to the blockchain a mathematical problem must be solved. Once the block is added, a percentage of bitcoin is given to the person who provides their computer for the computation of the mathematical problem. This person is called a bitcoin miner and the bitcoin he/she receives is as a reward for the maintenance of the public ledger that is stored on the blockchain.
The halving event was put in place to gradually reduce the reliance of Bitcoin on miners and move to more stable and reliable transaction fee systems. The current rate of bitcoin generated for adding a block is 12.5% BTC. This will drop to 6.25% BTC for a block in the next 300 days when the halving event hits.
This was mentioned by Tone Vays, a crypto analyst:
“Technically, everything is in play until the end of 2010, after that sub $5,000 is not likely. Worst case scenario: prices drop to $5K into the halving, then after the halving 70 percent of miners shut down due to negative revenue, Bitcoin spirals down in price but then rises from the dead!”
The Bitcoin protocol is built in such a way that the higher the number of miners, the more difficult the mathematical problem will be. Currently, at the rate of 12.5% BTC, the cost of maintaining high energy and computational computers is feasible. However, this will change with the halving event, forcing some miners to quit. The remaining miners may find that the lower miner rate would increase the profit percentages and the trend should stabilize.
The first halving event was in 2009. It is hard to predict the exact effects of a halving event but they are usually followed by an upswing in bitcoin value. The second halving in 2016 also saw an increase in value. All the surges were later corrected naturally in the course of time.