The upcoming Bitcoin halving might trigger network congestion and high fees
Bitcoin’s third block reward halving is scheduled to take place on May 12 at block #630,000. The event will drop the mining reward by half to 6.25 BTC per block, decreasing the annual growth of the Bitcoin supply from 3.7% to 1.8%.
Bitcoin mining profitability has recently increased due to the price increase, encouraging miners to dust off their old equipment. That has in turn increased Bitcoin’s network total hashrate and network difficulty. The surge in price was coupled with increased network activity, leading to Bitcoin transaction fees spiking to an average of almost $3 per transaction on April 30.
During the previous two halving events, most Bitcoin blocks had enough space to fit every pending transaction, but nowadays most blocks are at capacity. During this halving, people will compete with each other to include their transactions into new blocks. Under these conditions, it’s possible that the halving event could trigger network congestion.
Here is the logic. If the Bitcoin price doesn’t move after the halving, then mining profitability will plummet, signaling many miners to switch off. This could drastically decrease the network’s total hashrate, increase the time between blocks, and overwhelm the mempool with unconfirmed transactions. Such network congestion could temporary send on-chain transaction fees skyrocketing until the next difficulty adjustment takes place approximately one week after the halving.
However, the potential surge in transaction fees will bring mining profitability back up, incentivizing miners to switch some of their hardware back on, increasing the network’s total hashrate.
It’s still unclear what will happen after the halving, but Bitcoin users should be ready for different scenarios including a surge in transaction fee rates and temporary network congestion.
TON has postponed its launch, again
Telegram has delayed the launch of the TON blockchain for the second time due to the ongoing legal dispute with the U.S. SEC. Under agreements signed in October 2019, investors can now get 72% of their money back, which could be attractive to some investors amid economic turmoil triggered by the coronavirus pandemic.
However, pulling out will leave Telegram underfunded, so experts worry whether the company will have enough money to fund development of TON, continue the legal dispute with the SEC, and pay for the operating costs of Telegram messenger, which recently reached a userbase of 400 million.
Telegram CEO and co-founder Pavel Durov proposed to investors two choices: take the 72% payout right now, or wait one more to receive 110% of the original investment. This offer is not available to Americans to minimize regulatory risks for all parties.
In 2018, Telegram raised $1.7 billion from high-profile investors for the development of its Telegram Open Network (TON) blockchain.
In other news
On May 1, Bitcoin miners produced 16 blocks within an hour, and reported four new blocks within 46 seconds. The event coincided with a surge in unconfirmed transactions in the mempool. Bitcoin block generation is a Poisson process that targets a mean of 6 blocks per hour.
The amount of Bitcoin addresses with more than 10,000 BTC has been rising through March to May and recently hit the highest level since August 2019. That could suggest that some high net worth individuals are diversifying into Bitcoin amid the economic turmoil and upcoming mining reward halving.
After the Maker community vote, Wrapped Bitcoin (WBTC), has been added to the Maker Protocol as a collateral asset in addition to ETH, BAT, and USDC. WBTC is an ERC20 token backed with with a custodial reserve of Bitcoin (BTC).
The American venture capital firm Andreessen Horowitz (a16z) has raised $515 million for a second crypto-dedicated fund to invest in crypto startups and DeFi. A16z has previously backed Coinbase, Libra, Polychain, Maker, Compound, dYdX, and other blockchain startups.
A survey, conducted by cryptocurrency exchange bitFlyer polled 10,000 people from 10 European countries and revealed that two-thirds of respondents believe cryptos will still be around in 10 years.
A typo has been found in an Ethereum-based onchain options trading protocol Hegic, leading to 152 ETH (~$30,000) being forever frozen in smart contracts. All victims have been refunded.