- Business Insider UK spoke with Garrick Hileman about Bitcoin mining.
- Hileman explains why Bitcoin mining might not be as profitable in the future.
- As more users are mining Bitcoin, the amount rewarded for doing so is going down.
Business Insider UK spoke with University of Cambridge Research Fellow Garrick Hileman about cryptocurrency mining and the potential problems that it could bring in the future.
He explains that the amount of Bitcoin rewarded for mining is halved every four years which means that it will be less profitable.
Read the full transcript below.
Garrick Hileman: So as we look into the future and the reward of new Bitcoins is reduced from the current 12.5 to about 6.25 new Bitcoins every ten minutes which will occur in around July 2020.
Every four years that reward gets cut in half. Eventually you get to the point where the nominal number of new Bitcoins you earn for mining Bitcoin becomes quite small. Now if the price of Bitcoin continues to climb above 100,000 per Bitcoin, then mining a tiny fraction of Bitcoin still is quite lucrative.
But ultimately the number of new Bitcoins coming into existence through mining will be cut to zero. We’ll hit the 21 million limit and the only direct financial incentive left to mine Bitcoin will be transaction fees and there’s an open question as to whether or not the transaction fees will provide a sufficient financial incentive to maintain the kind of computing power that Bitcoin enjoys today which is essential to its security.
If the computational power applied to the Bitcoin network is reduced sufficiently it arguably makes it easier to mount a 51 per cent attack to disrupt the network and so there could be some issues down the road if the rewards are not sufficient.
However there could be a reason to subsidise the cost of mining if Bitcoin continues to be a valuable asset because, simply, they own a lot of Bitcoin and so they are willing to lose money on mining to maintain a secure network.