Bitcoin Cash [BCH] Halving, Mining Rewards Cut Down to 6.5 BCH from 12.5 BCH

Today, April 8th, 2020 marks as the first halving of Bitcoin Cash. The network block rewards halved at block 630,000 indicating how the rewards given to BCH miners have been decreased to 6.5 from 12.5 BCH.

BCH is the first SHA256 branch to get halved this year. In the coming days, BTC [Bitcoin] and BCH SV [Bitcoin Cash Satoshi Vision] will also be halving their miner rewards.

What is halving about?

The Bitcoin ecosystem revolves around certain pre-defined rules. One of them is a finite supply of the currency. There are 21 million Bitcoins in the world and the last BItcoin is likely to be mined in the year 2130 after which the network will stop minting more. The limited amount of Bitcoins in circulation gives it the gold-like feature of being limited. 

Every 4 years, Bitcoin mining rewards get cut into half. This was coded in the blockchain by Satoshi Nakamoto from the beginning to make the miners receive 50% less BTC once in 210,000 blocks.

Bitcoin Cash is a fork of Bitcoin which is why the same rule is implied to it. Except in BCH after 630,000 blocks it gets halved. 

Why is halving necessary?

To understand why halving is necessary it is first important to understand how mining works. Miners solve mathematical puzzles to compete with each other in publishing a new block of transactions to the public blockchain. In return for the computational power and efforts put in to validate the block, miners get a reward along with transaction fees.

Miners have their skin in the game, they spend big on equipment to mine and the electricity to power the hardware. The equipment costs get covered with initial returns and the electricity costs keep reoccurring which is why the rewards at a point have to be converted in fiat to pay for the mining expenses as well as to utilize it for their regular expenditures.

Miners are willing to spend money on those resources in exchange for the possibility of receiving a block reward. But this only works out well if miners earn profits by keeping the cost of production/resources lower than the rewards they receive.

With halving, miners get half of the reward they received earlier forcing loss-making miners to quit. Making the existing miners in the community opt for energy-efficient hardware that have high processing power with lower power consumption.

Gradually, this keeps the network healthy even though there are initial hashrate falls and price drops. 

After today, the BCH mining community will reap half the rewards they did until yesterday. As this is the first BCH halving it is difficult to conclude what’s next for the coin.