The throttling is designed to keep the currency healthy, but could still cause a shock.
The hosts who maintain the servers of the Bitcoin network (so-called “miners”) are expecting some bad news early next month. Around July 10 th , their pay will suddenly be cut in half, with the reward for a unit of computing work dropping from 25 bitcoins (currently around $14,250) to 12.5 coins. Bitcoin watchers are debating what exactly the consequences of that drop will be for the decentralized payments network, and some think there’s trouble ahead.
There’s no penny-pinching boss cutting fat at Bitcoin, Inc. (Actually, there’s no such thing as Bitcoin, Inc.) The regular halving of miner payouts has been baked into the open-source digital currency since it debuted in January of 2009, occurring roughly every four years. The cuts are intended to slowly throttle the growth of the Bitcoin supply, an anti-inflationary control that helped drive early faith in the technology.
The first halving came in late 2012, when most miners were still small-scale hobbyists. Now, though, miners are more likely to run huge server farms with thousands of cutting-edge processors and full-time staff. They’re the essential workhorses of the Bitcoin network, processing and recording tens of millions of dollars in payments daily.
And like any business, they have fixed costs—particularly electricity. Chandler Guo, who runs one of the largest Bitcoin mining operations, argues that the impending halving of payouts will render some miners unprofitable , forcing them to shut down suddenly. That could slow down the network, and potentially destabilize it—somewhat like what would happen if Visa suddenly took a large portion of its servers offline.
Normally, the Bitcoin core software is able to compensate for shifts in the miner population, automatically making it easier to earn Bitcoin as the network’s processing power drops. […]
