Bitcoin Cash recently went through its first mining reward halving this week which saw the reward for unlocking a new block cut from 12.5 BCH to 6.25 BCH. This has expectantly had a drastic effect on the Bitcoin Cash mining algorithm which has plummeted nearly 80 percent.
With the mining of new blocks on Bitcoin Cash only offering up half the value that it did before the halving, the mining incentives are that much less. Therefore, for Bitcoin Cash miners, many would have suddenly been unprofitable going after new blocks on that chain forcing them to capitulate.
The danger of such a drop in hash rate is not only the lessening interest in mining the coin, but it also makes the network far less secure as it has been deduced that a 51% attack on the Bitcoin Cash chain could cost as little as $10,000 an hour. Launching such an attack would allow the hackers to change and impact the translations, invalidating a lot of the chain’s overall value.
A sudden drop
According to f2pool, BCH hash rate dropped from nearly 4,200 pentahashes per second (PH/s) to as low as 720 PH/s within two days of the halving taking place. Over the past five hours, the Bitcoin Cash hash rate has more than doubled from the local low to hover at 1,600 PH/s.
The other effect of this loss of hashing is that Bitcoin Cash miners have gone where it is more profitable, and with Bitcoin soon to face its own halving, there is a small window left to cash in on the original blockchain.
It has also been reported that Bitcoin’s mining efforts have increased by 30 percent following the BCH reward halving. This sudden drop was quite predictable and easy to see coming as miner rewards and their incentives are everything. The loss of 50 percent revenue would not entice moners to keep going for purely economic reasons.
Fears for Bitcoin?
The fact that BCH has halved before Bitcoin does open a window on what is to come for Bitcoin when it’s halving takes place in May. Bitcoin has seen its hash rate rising dramatically and steadily for the past 18 months as miners try to get as much as they can before the halving, but the recent price crash shook a lot of miners out.
This could actually be to the benefit of Bitcoin though as it may have already shaken out miners that would have found the 50 percent less reward scheme not profitable. Those miners who couldn’t handle the price drop are now out the picture and those who have stayed should be able to weather the storm.
Additionally, Bitcoin is more of a store of value so there is an additional incentive to accumulate the coin even if it is less profitable as many feel that post halving the price may well increase significantly