Brake on bitcoin. The most famous of cryptocurrencies will face, during the night from Friday to Saturday, the third “halving” in its short history. This mechanism, planned since its creation in 2009 by the mysterious Satoshi Nakamoto, consists of a halving of the production of bitcoin in order to one day reach 21 million tokens in circulation – there are around 19 today today. Not one more. A limited supply considered as an anti-inflationary mechanism. In theory, the planned scarcity of cryptocurrency should make it increasingly valuable. Not without pain, however, for the entire invisible industry that supports this digital asset: that of miners.
“The calculation is very simple, our income will also be halved,” indicates Sébastien Gouspillou, head of BigBlock Datacenter, a company specializing in bitcoin mining. Its activity, vital to the system, boils down to validating “blocks” of transactions made with cryptocurrency, in order to register them in a chain of blocks (or blockchain), his public account book. This work, requiring significant resources in computing power and energy, is paid in newly created bitcoins. So, when production must be halved – every 210,000 validated blocks, or approximately every four years currently – this reward also drops by half. From 6.25 bitcoins to 3.125 bitcoins per block, very precisely, overnight this weekend. American media Bloomberg estimates annual losses for miners at $10 billion, based on the cryptocurrency’s current price of just over $60,000 per unit.
New Eldorados
If the event is not a surprise, the biggest players on the planet are still looking gloomy. Listed and valued at several billion dollars, the American companies Riot Blockchain and Marathon Digital Holdings have seen their stock market prices fall by almost 15% over the last five days. The decrease in fixed reward adds to other challenges. The first, that of the maintenance of computing hardware, comparable to that used by modern AI applications. In fact, while the network was formed thanks to a crowd of “small miners” in its beginnings, today only vast computing farms made up of hundreds of computers, or even “pools” bringing together several managers, remain. sharing the rewards. Real organizations, like Riot and Marathon Digital.
But the major problem highlighted by halving is that of energy. “Miners record losses when their electricity is too expensive,” points out Sébastien Gouspillou, whose activities in France have ceased since 2019, among others, for this reason. However, the trend is rather upward all around the planet. Leaving, at halving time, two options for miners. “Make their machines more efficient and expand their own capacities, in order to have more volume and negotiate lower prices,” explains Youssef El Manssouri, head of the Sesterce company and which has activities mining in Norway and the United States, countries where the majority of miners are located.
Or relocate their facilities. “This is one of the advantages of bitcoin mining: you can set up anywhere,” says Sébastien Gouspillou, who turned to Kazakhstan, and especially Africa, in Ethiopia and Congo, in the Virunga Park . While constantly examining his world map with appetite. “Countries with hydroelectric surpluses become Eldorados for miners.” Good spots are quickly shared within the community. “Iceland is an ideal mining location due to the low temperatures, which reduces the cost of cooling equipment”, for example, distinguishes the specialized payment platform Cryptomus on its blog.
High bitcoin, happy miners
Political stability, nature of energy, taxation, other parameters however complicate initial intentions. “In Estonia, the payment of taxes on cryptocurrency income is very strictly monitored. The mining of any cryptocurrency, including Bitcoin, is taxable,” warns Cryptomus in particular. So, the mining industry’s best ally in the face of halving ultimately remains bitcoin itself. Because the cryptocurrency, despite its fluctuations – temporarily causing miners to lose money – continues its inexorable rise. This, thanks to positive signals for its adoption, like the creation of “bitcoin spot ETFs”, general public investment products replicating its price, and thanks to the scarcity orchestrated by halving, which brings it closer to ‘an asset like gold. So much so that “miners today have never earned their living so well,” recalls Sébastien Gouspillou. Even accounting for a rise in energy prices, at the last reward halving, bitcoin was trading around $8,000. That is seven and a half times less than today.
The current rate of halvings – every four years until 21 million bitcoins, or around 2140 – raises questions in the long term. For the CEO of Marathon Digital, one of the giants of the sector, the price must now no longer fall below $46,000, otherwise the reward will not cover all his investments in equipment and energy. Within eight years, the gain for each validated block will be less than one bitcoin. The latter will therefore have to be much higher. Then even more four years later, and so on. At this infernal pace, “only the most sophisticated miners, capable of appropriating the largest volumes of energy will remain”, breathes Youssef El Manssouri, who has already pivoted part of his activity towards artificial intelligence. The battle to get your hands on the last two million bitcoins will inevitably result in casualties.
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