15 Apr 2020

The aftermath of the BCH and BSV halvings

It has now been a week since the halvings of the block subsidies on BCH and BSV. As the dust has settled, we can draw some preliminary conclusions regarding the halvings and their effects on the hash rate distribution between the different networks.
BCH and BSV Shares of total SHA-256 Hash Rate.png
Sources: Glassnode and
We predicted that the halvings would lead to a halving of the hash rate of the two networks, which in turn would leave them more vulnerable to 51% attacks.As predicted, the reward halvings led to hash rate halvings. The chart above show the share of the total SHA-256 hash rate committed to Bitcoin Cash and Bitcoin SV over the last month. We can clearly see that the halvings had a dramatic effect on both of the bitcoin forks.
  • The Bitcoin Cash share dropped from 3.4% on average to around 1.5%, a 56% reduction in hash rate.
  • The Bitcoin SV share dropped form 2.39% on average to 1.19%, a 50% reduction in hash rate. 
The short term impact on Bitcoin Cash might have been exaggerated due to the delay between the halving of BSV compared to BCH. We can clearly see that the Bitcoin SV hash rate rose following the halving of Bitcoin Cash, and we can also see that Bitcoin Cash’s relative share of the SHA-256 hash rate increased following the Bitcoin SV halving, as the Bitcoin Cash hash rate once again surpassed Bitcoin SV.  Going forward it will be interesting to see if someone tries to perform a 51% attack on either BCH or BSV, and if so, how the two projects cope.
Volatile block discovery
There was an immediate impact of both the halvings in terms of block discovery by miners. In Bitcoin Cash, the blocks was on average found every 19.5 minutes the 24 hours following the halving. That is almost half the speed as the target of 10 minutes intervals.However, as Bitcoin Cash reached its 144th block past the halving, the block generation picked up speed and moved towards an average of one block every 10 minutes over a 24 hour period. This is a result of the difficulty in Bitcoin Cash being based on a block-by-block readjustment based on a moving average of the hash rate commited over the last 144 blocks. Still, the amount of blocks generated per hour in Bitcoin Cash has been far more volatile than prior to the halving.
Blocks discovered per hour, BCH
Source: Blockchair
As illustrated in the chart above, most of the time, only 2-3 blocks are generated per hour. But, there is also a 7-hour window every day, featuring intensive and rapid block generation, peaking at 30 blocks per hour on several occasions. These huge fluctuations might be attributed to the reduced hash rate on the Bitcoin Cash network. This give the large players even more control and opportunities to game the difficulty adjustment algorithm to provide favorable miner rewards. Squeezing out the maximal amounts of blocks per energy consumed possible.
Bitcoin mining is approaching a new all time high
Amidst the rapid reduction in hash rate of the bitcoin forks, bitcoin itself has seen an increase in hash rate. This rise is to some extent explained by miners of BCH and BSV moving over to mining bitcoin, as it became relatively more profitable. Still, that would only account for an increase of around 3 exa hashes per second. The bitcoin hash rate, however, has grown with around 15 exa hashes since the halvings. This suggest that miner migration is only a part of the explanation behind the recent growth of bitcoin mining.  
Bitcoin hashrate, 24h MA
Source: Glassnode
The upcoming bitcoin halving
Bitcoin’s halving is estimated to happen on May 12. Following the halving, it will be interesting to see whether BSV and BCH will regain their hash rate shares, or if the interest in the protocols will continue to crumble. It will also be interesting to follow the frequency of block generation in bitcoin. Both BCH and BSV initially experienced slow block production, which were normalized quickly due to the daily (144 blocks) difficulty adjustment. Bitcoin, however, changes its difficulty only every two weeks (2016 blocks). This can potentially lead to a long lasting slowdown in block discovery, following the halving. Some miners might have to turn off if the revenue is not sufficient to cover the marginal cost, and with slower blocks, the adjustment period of 2016 blocks might take a lot longer than two weeks. That said, bitcoin as the dominant SHA-256-coin will hardly suffer from miners switching to BCH and BSV. The reason is that a doubling of the hash rate of BCH and BSV would be needed to nullify the relative effect of the bitcoin halving, but would only result in a 3% drop in the bitcoin hash rate. 
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