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June 15, 2021
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Bitcoin Cash: what effect will the first halving have?

Will the Bitcoin Cash (BCH) halving be the same as Bitcoin (BTC)?

The halving of Bitcoin Cash is likely to take place on April 7, 2020 with growing fear and expectations amid analysis, calculations and many opinions.

Bitcoin halving (BTC) is cutting the reward in half. The reward for miners for adding a new block to the chain is reduced by half periodically every 4 years.

Comparisons to the past and the inflation rate shape the Bitcoin (BTC) price narrative. His response to halving has always produced a sharp increase in price.

  • 50 BTC every 10 minutes until the end of 2012;
  • 25 BTC every 10 minutes until mid-2016;
  • 12.5 BTC every 10 minutes until May 2020;
  • 6.25 BTC every 10 minutes until 2024.

First halving of Bitcoin Cash

Since Bitcoin Cash was born as a Bitcoin fork in 2017, it has reached its first halving now in 2020.

By sharing your BTC history up to the time of the split, you also reduce the reward to 6.25 BCH. In fact, the two chains are the same age precisely because they shared the first years of their lives.

  • Many in the community believe that the project will have the same fate as the chain from which BCH split, leading to a desirable price increase;
  • For many others, this will not happen; instead, there will be major problems.

The price trend is not so different and, therefore, expectations are that halving will lead to similar effects.

Roger Ver, referring to this halving in 2020:

“This is my third halving. Nothing exciting has happened in the last two times and I also don’t expect anything exciting to happen now. ”

The drop in issuance on the Bitcoin Cash network will change the inflation rate to 1.8% per year.

In contrast to traditional monetary policies, this model is intended to be successful when compared to that of central banks, such as the Federal Reserve, which claims to keep the inflation rate at 2%, but then reveals a realistic rate close to 10%.

Dangers for Bitcoin Cash

What is worrying, however, is not the external speculative dynamics, but the internal dynamics.

Many miners are concentrating their computing power on the most profitable chains. At the moment, BCH is supported by miners, not only because of its fundamentals, but because it is interesting in economic terms.

By decreasing the profitability of the BCH (before the BTC), there may be a decrease in the hashing power that will migrate to the BTC. BTC will remain more profitable until May, the month of its halving.

The BCH hashrate is very low compared to the total power of the SHA256 ASICs available worldwide. Any reduction can subject you to the risk of a 51% attack.

If now only 3% of the net is sufficient to attack the BCH, after halving, it may be 1.5%.

The reason why BCH has not been attacked so far is very simple: the network of miners considers the survival of the project to be fundamental and, with it, that of BSV.

The two chains represent a defense against the scaling model defined by the BTC developers.

Mining companies do not intend to hinder the development and maintenance of projects that, through an increase in the size of the block, propose a dimensioning model more aligned with what was foreseen in the Satoshi Nakamoto whitepaper.

Why will BCH have halving before BTC?

The fork of Bitcoin in August 2017, which led to the birth of BCH, included the implementation of an adaptive difficulty adjustment algorithm different from the basic Bitcoin algorithm (BTC).

Amaury Sachet designed this system to avoid the inconvenience of less hashing power in the first days of separation from BTC. The model served to avoid being overwhelmed by BTC’s computing power and survive the fork.

This algorithm was used in the first months by miners who varied their hash rate from day to day, accelerating the generation of new blocks.

Acceleration is the reason why Bitcoin Cash is now ahead of BTC, anticipating halving.

In November 2017, a hard fork was implemented in the BCH to solve the difficulty adjustment problems. After that fork, day-to-day block counting was much more reliable and stable.

Source: cryptonomist

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