What does the Bitcoin halving mean for network energy consumption issues?

Author: Shiraz Jagati, CoinTelegraph; Compiler: Deng Tong, Golden Finance

Bitcoin halving occurs approximately every four years, and the upcoming halving event seems to have once again aroused the interest of global investors interest.

This is because the halving effectively reduces the rate at which new Bitcoins are generated and introduced into circulation. This mechanism is at the heart of Bitcoin’s deflationary economic model and is designed to limit the total supply of Bitcoin to 21 million.

Historically , the halving has had a significant impact on the price of Bitcoin and the broader cryptocurrency market. The first Bitcoin halving in 2012 slashed the block reward from 50 Bitcoins to 25 Bitcoins, and subsequent halvings in 2016 and 2020 further reduced the rewards to 12.5 and 6.25 Bitcoins respectively. Bitcoin.

While these events have traditionally resulted in increased market interest and significant price increases, there is also an increasing conversation surrounding their environmental impact.

Reducing mining rewards raises questions about the sustainability of the mining industry, particularly how it prompts a shift to greener, more energy-efficient technologies amid diminishing returns. These changes are critical to Bitcoin's long-term survival, especially as environmental issues are as central to the discussion as economic factors.

Bitcoin energy consumption issue

The halving of Bitcoin mining rewards has amplified the already existing concerns surrounding the cryptocurrency High energy consumption is discussed, especially since its associated computing processes consume large amounts of electricity primarily derived from fossil fuels.

Critics further point out that if the reduction in mining rewards leads to more energy-intensive mining methods to maintain miners’ profitability, this could exacerbate Bitcoin’s increased carbon footprint, thereby aligning with many of the United Nations’ global conflict with the Sustainable Development Goals.

Not everyone is convinced that the halving will lead to increased energy consumption.

Aarvind Sathyanandam, co-founder and chief strategy officer of Velar, a Bitcoin-based decentralized finance (DeFi) platform, pointed out that the incident will mainly affect the block rewards issued to miners on the Bitcoin network, rather than its energy consumption.

Furthermore, he said reduced mining revenue may incentivize less efficient miners to upgrade older equipment to newer, more energy-efficient models in order to maintain profitability:

“If the value of Bitcoin or transaction fee revenue does not rise to compensate miners for their operating costs, then the halving will increase the operating costs of miners. This may force some miners with thin profits to suspend operations. However, Efficient miners will upgrade to advanced ASIC equipment to maximize productivity and minimize energy overhead. The latest mining equipment tends to be more energy efficient in terms of hashrate per watt. ”

Sathyanandam said that while the halving could lead to a short-term decline in energy use if unprofitable miners halt production,broader industry incentives around efficiency and innovation could Driving continuous improvements in energy.

“Bitcoin’s self-balancing ecosystem has always rewarded miners who develop with the best hardware and latest efficiencies. “Hence, the halving may accelerate progress in the long run, And move to cleaner solutions to ensure network security,” he said.

Andrey Stoychev, head of prime brokerage at crypto lending platform Nexo, believes that after the halving One of two scenarios will occur.

In the first scenario, the recent strong demand for Bitcoin is likely to continue amid reduced supply, unless there is a stronger price trend appreciation, otherwise there will be little way for mining operators to continue operating.

The second course of action is for Bitcoin miners to invest in more advanced and efficient equipment to cope with maintaining Bitcoin The network brings less spending.

Stoychev noted, “Looking at the number of new addresses and the number of transactions, it is unlikely that energy consumption will go down after the halving with all this activity. ”

A spokesperson for cryptocurrency exchange Bittrue said,On the one hand, the reduction in mining rewards may lead to a reduction in energy consumption, but on the other hand, it may also stimulate energy use because miners Upgrades may be sought to maintain profitability. More powerful, potentially more energy-intensive equipment: “Upgrades may increase energy consumption, especially if miners prioritize computing power over energy efficiency. ”

Can the halving lead to more sustainable mining practices?

Bitcoin mining The community continues to claim that the industry has the ability to enhance the development of renewable energy. Likewise, can the Bitcoin halving help miners become more energy efficient?

James, CEO and founder of DFG, a Web3-focused investment firm Wo said energy expenditures account for a large portion of mining costs, creating a strong incentive to improve energy efficiency or switch to more affordable and sustainable energy sources such as solar, hydropower and electricity. He added:

“This shift could promote more sustainable mining methods, but the speed and scope of this shift will depend on factors such as the availability of renewable energy, technological advances in mining equipment and changes in energy prices. ”

On a similar note, Sathyanandan said the halving could spur a shift towards more sustainable mining practices over time, saying many miners are already moving in this direction and Highlighting recent data showing: More than 50% of Bitcoin’s energy mix comes from renewable sources.

“Post-halving pressure may push this number even higher. Shifting another 10-30% of the global mining industry toward renewable energy could fully decarbonize the Bitcoin network. While miners will shift to the lowest-cost electricity regardless of source as a result of the halving, renewables appear poised to start significantly undercutting fossil fuel energy economically," he said.

Stoychev Convinced , the only way for miners to stay operational is to adapt to the new economic reality brought about by the halving. Speculating on how things might develop in the short term, he believes that major consolidation is likely to occur, with smaller mining operations potentially being acquired by established industry giants — — He sees this as a sign of maturity.

“In this day and age, where technological advancements are taken for granted, there is no doubt that more efficient mining equipment will enter the industry. In terms of renewable energy sources, although challenging, they may be the most reasonable future for Bitcoin," he said.

Green mining may be the only way forward

As large corporate entities continue to demonstrate their interest in Bitcoin in different ways, it is reasonable to believe that in the future, companies may want to gain exposure to this emerging asset class, but also need more A clear sustainability roadmap to meet the requirements of its stakeholders.

Sathyanandan believes this will incentivize more miners to participate in carbon offset schemes and invest directly in technologies that run entirely on renewable energy or site. He added: “Prioritizing environmentally friendly practices allows publicly listed miners and corporate farms to tap into this type of institutional investment capital. ”

Furthermore, he believes that while miners will still continue to chase profits, the halving will refocus incentives on large-scale cheap power. As corporate and institutional climate priorities proliferate, the halving will The transition to green mining is imminent after the halving. He said:“Renewable energy seems destined to become Bitcoin’s energy backbone in the long term, and the 2024 Bitcoin halving could be a turning point for large-scale sustainability plans . ”

Robby Greenfield IV, co-founder and CEO of Web3 development studio Umoja Labs, noted that while some other analysts may have concerns about how the Bitcoin halving will affect global energy consumption levels disagreement, but in his view, this incident will only increase electricity consumption, leading to increased concentration of miners.

Nonetheless, he believes that larger companies will continue to look for sustainable energy sources (such as solar energy), To minimize long-term increased costs. However, in Greenfield’s view, this all depends on whether these mining entities have the ability to do so.

Other factors to consider

As the halving approaches, Bitrue’s research team believes thatanother impact we may see is the expanding geographic distribution of miners around the world .In their view, the distribution of these individuals and entities is likely to change significantly, as many regions of the world - especially Eastern Europe and Africa - offer abundant and cheap renewable energy. The team added: “This could have implications for energy markets and regulatory frameworks in these regions. ”

Finally, advancements in Bitcoin-related technologies, such as the integration of Lightning Network payments, may further have a positive impact on the dynamics of energy consumption and sustainability, as Layer 2 schemes allow transactions to take place off-chain. , thus reducing the need for costly computing power.