Bitcoin Mining, As the incentive structure in the network, the rate determined

the The connection between Bitcoin Mining and the exchange rate is commonly underestimated. What is the role of the Bitcoin Mining game when it comes to pricing? Why is rising in anticipation of an upcoming halving of the Block Reward is the Bitcoin rate historically? And the Mining for the Each of the is worth? The should know investors on the BTC Mining.

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On the 25. April 2019BTC$5.450,00 -0.23%part Facebook Twitter LinkedIn xing mail

The Hash Rate is rising again. Currently, the battery is accumulated, computing power in the Bitcoin network and 51.5 million Terahashes per second (Th/s). Compared with the medium-term low of about 35 million Th/s in December 2018, a significant rise in the Hash Rate in less than half a year.

Bitcoin Hash Rate since April, 2018

The increase in falls, however in a period of time, in the still not at all clear whether the Bitcoin price has found its bottom already. How to explain it so that the Mining farms start operating again, without a price signal, would this be justified?

Reward Halving triggers accumulation of

the solution to The puzzle lies in the Bitcoin Core Code. This provides for, namely, to halve the so – called Coinbase Reward – so the largest part of the salary for the Miner-all four years. The economic shock effect of this so-called Coinbase Reward Halvings is not to be underestimated. Imagine the additional Supply of an asset such as Gold would not be constant, but to decrease disinflation from year to year. The rate of the reactions would not have to wait. Finally, the scarcity of a value system increase mostly for the price. The ratio of existing Supply ("Stock"), and the annual additional amount ("Flow") is called "Stock-to-Flow".

inflation rate of Bitcoin. Currently, 84 percent of all BTC are already gemint. Image source: bitcoin wiki

We have already established that the Coinbase Rewards make up the largest part of the revenue of the Bitcoin Miner. However, no one claims that Miner must be fresh to throw mined BTC directly to the market.

on The contrary, A common strategy is to liquidate only a portion of the mined BTC to cover the running costs. The rest of the BTC assets will remain, as a rule, in the Cold Storage of the Pools, to high rates as to justify a Liquidation.

With the Reward Halving, it will be starting in may 2020, twice as difficult to accumulate Bitcoin. Who's driving today, already, the Hash Rate is high, you can expect to have until may of next year with a comfortable cushion to BTC.

With the halving of the Coinbase Reward to 6.25 BTC, the Bitcoin inflation rate of currently 3.8 per cent to about 1.8 per cent, is halved. Bitcoin is moving further on the paths of an increasingly diminishing Assets.

by the Way: The fact that mined BTC are frequently the first, in the case of the miners, abbreviates the offer in addition, and thus increases the price.

Bitcoin's inflation rate is projected to decline to 1.8% annually in May 2020 pic.twitter.com/AcmglWFFkK

— CoinMetrics.io (@coinmetrics) April 15, 2019

For whom Mining

Mining is to secure the network integrity and to help a small group of Mining Pools of wealth. In most cases, Mining is, therefore, not profitable. This is the Bitcoin Core Code with the dynamic adjustment of the Mining Difficulty, i.e. the difficulty to find a new Hash. According to the Code all of ten minutes to find a Block and thus the Coinbase Reward will be issued.

this Happens because of an Excess of Hash Rate in the network faster than on average within ten minutes, automatically adjusts the Difficulty.

Nevertheless, it is possible in exceptional cases, a profitable Mining Business. This, one suspects it has to do with the current prices. Because Mining Rigs consume immense amounts of energy.

To illustrate this, an example: we assume that all the Miner work with the Antminer S9 from Bitmain. You take its specifications as the basis, you can not assume that Miner in electricity costs of $ 0.05 per kWh can profitably mine-as long as the price of Bitcoin 3.250 US – falls short of dollars.

Here's the crux: the electricity cost of 0.05 US-Dollar can only be found at a few locations around the world. Even in China the average is at about 0.08 US dollars. Only during the rainy season, Mining can press-farms by lump-sum contracts the price of Electricity below a critical level and is profitable mining.

With about $ 0.35 per kWh in Germany is one of Germany by the way, to the record holders; a profitable Bitcoin Mining is not possible.

conclusion

to back up the network integrity of Bitcoin, the Proof-of-Work algorithm is awesome. Finally, in connection with the periodic Reward Halvings exactly the right incentives for all network participants. Both miners and investors course, accumulate in the Knowledge of the cyclical nature of the Bitcoin in the run-up to a halving of the BTC inflation rate Coins. This drives the course to the North and flushes out of both new Miner as well as investors in the market. This would benefit everyone: the investor and Miner to achieve returns and the network is larger – and therefore safer.

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