As the fourth Bitcoin (BTC) halving gets closer, some experts believe the event could lead to centralization risk, threatening the blockchain network.
Once every four years, the block reward for Bitcoin miners is cut in half to help the asset maintain its scarcity. The event is called halving. Historically, miners have stayed fully operational and even grown in number over the last three compensation cuts thanks to the rising BTC price.
However, many wonder if the BTC price is high enough for miners to remain operational or if it would face centralization and even existential risks after the fourth halving event.
Speaking with crypto.news, Ryo Coin co-founder Lani Dizon says market dynamics can change, and unforeseen events can have significant impacts.
“Trying to predict the exact impact of a halving on Bitcoin’s price is a challenge. Many factors can influence the market, including overall demand for Bitcoin, investor sentiment, market trends, global economic conditions, regulatory changes, and technological advancements within the blockchain ecosystem, and more.”
Lani Dizon, Ryo Coin co-founder
Dizon believes while some miners might find the reduced block reward “challenging,” especially if the price doesn’t increase immediately or sufficiently to offset the reduction in rewards, the “Bitcoin network is designed to adjust.” She added:
“However, from a logical perspective, when mining costs are lower than Bitcoin’s market value, more miners will stay in the network. When mining costs increase beyond the miner’s revenue, some miners will leave.”
Compensation concerns
One of the main concerns around the centralization of Bitcoin is the compensation of the miners helping the network stay operational.
As the block reward reduces by 50% in the upcoming halving — falling from 6.25 BTC to 3.125 BTC — Bitcoin’s high price volatility could make it harder for individual miners to be well compensated to operate their nodes in challenging conditions.
Historically, the BTC price reached new all-time highs a year or 18
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Author: Wahid Pessarlay