Bitcoin halvings have a significant impact on mining operators. As the block reward is cut in half, operators must adjust their mining strategies to remain profitable. This can lead to changes in the mining landscape, with some operators struggling to compete and others finding new opportunities
Halvings, pre-programmed events within Bitcoin’s protocol, reduce block rewards by 50% approximately every four years. These halvings significantly impact miners, who rely on block rewards for profitability.
By employing a dynamic simulation model, this study quantifies the halving’s impact on miners’ profitability and competitive advantage. The findings reveal a substantial decrease in revenue after each halving, leading to a rise in production costs and a narrowing of profit margins.
Furthermore, halvings intensify competition among miners due to reduced profitability. As profitability decreases, high-cost miners are forced to exit the market, while low-cost miners gain a competitive edge.