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The Bitcoin halving is anticipated to occur in the second half of April this year. Like real-world gold, bitcoin is considered by many to be \u201cdigital gold,\u201d with a maximum supply of 21 million coins. As the Bitcoin halving draws near, many are concerned that miners will endure an inevitable revenue cut following the major event.<\/p>\n
Mining bitcoin has previously been a profitable way for people to earn rewards while simultaneously securing the network. Fisher Yu is the co-founder of Babylon, a project aiming to create a Bitcoin-secured proof-of-stake economy. He noted the motivation behind early participation in Bitcoin\u2019s proof-of-work security, attributing it to the high amount of bitcoin rewards available when the blockchain was first created.<\/p>\n
\u201cNakamoto\u2019s hope is that, over time, Bitcoin<\/a> becomes very well adopted so that the increase in transaction fee will outrun the reduction in mining<\/a> rewards, so that miners\u2019 operational costs are well covered,\u201d Yu said.<\/p>\n Read more:<\/strong> Why most bitcoin mining stocks are down amid a persistent crypto rally<\/a><\/p>\n Although such a trend is observed, Yu notes that existing transaction fees are not quite sufficient, and there are growing concerns that miners may leave the network, reducing the blockchain\u2019s overall security.\u00a0<\/p>\n This belief is shared by Max Chamberlin, the founder of fiat-to-crypto on and off-ramp payments provider Bifinity, who noted that many bitcoin mining businesses could become unsustainable<\/a> following the halving<\/a>.\u00a0<\/p>\n \u201cWhile bitcoin\u2019s mining difficulty is dynamic, automatically adjusting to the current hash rate capabilities, it would still be better for the network\u2019s decentralization to have as many miners as possible,\u201d Chamberlin said.<\/p>\n Read more: <\/strong>20% of bitcoin network hash rate could go offline after halving: Galaxy<\/a><\/p>\n He notes that the emergence of Bitcoin Ordinals<\/a> has boosted on-chain activity significantly<\/a> and provided miners with a considerable new stream of income through transaction fees, which have so far amounted<\/a> to almost $240 million.<\/p>\n \u201cIn a broader sense, the introduction of ordinals and Runes has sparked considerable excitement within the cryptocurrency community in general, introducing a novel category of tokens \u2014 assets that exist directly on the Bitcoin blockchain,\u201d Chamberlin said.<\/p>\n Despite this, Chamberlin is aware that the Bitcoin ecosystem still needs to work on developing broad-spectrum, general-purpose applications, a challenge that stems primarily from the constraints of Bitcoin\u2019s programming language, Script.<\/p>\n \u201cThis predicament echoes a longstanding conundrum in finance \u2014 the emergence of new assets begs the question of what to do with them,\u201d he said.\u00a0<\/p>\n Read more:<\/strong> The history of Bitcoin halvings \u2014 and why this time might look different<\/a><\/p>\n He remarks that a potential solution to this concern is to integrate assets into DeFi services through Bitcoin layer-2 solutions, which often enable a more complex ecosystem of decentralized applications.<\/p>\n \u201cBitfinity, a next-gen EVM<\/a> serving as a layer-2<\/a> for Bitcoin and other assets, emerges as a strong contender in this regard. It provides developers with the familiar EVM programming environment but with access to Runes and other Bitcoin-native assets,\u201d Chamberlin said.\u00a0<\/p>\n Yu agrees and explains that Babylon\u2019s Bitcoin staking protocol could alleviate some of the growing concerns around cut rewards. He notes that miners could use their bitcoin to secure its proof-of-stake economy and be rewarded for their security.<\/p>\n