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After a halving, if price increase doesn't compensate the decrease of the reward for miners, some of them will become unprofitable, and they will stop mining.

With less miners, complexity decreases, making it easier, less energy intensive, until things stabilize at a smaller and again profitable network size.

Now, a problem for BTC is that the existing hardware doesn't go away, it's just powered off because it's not profitable. So there is some risk that a crash would precipitate a collapse and network troubles. Like this:

1- Halving happens. Lots of miners are now unprofitable.

2- Price doesn't rise as expected.

3- Needing to pay their debts, miners sell off BTC hoards.

Things will eventually stabilize of course, but in the case of a bad enough crash we have a new interesting problem. Suppose difficulty falls to 10% of what it is now. That means that for every piece of active mining equipment there exist 9 that could theoretically be brought back in, and attack the network.

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  • Do you have a concrete question? Revisiting this, I notice again that you only describe a scenario but didn’t posit a specific question.
    – Murch
    Commented Feb 1 at 16:34

2 Answers 2

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The question post describes a scenario and doesn’t actually ask a question, so I can’t answer the question, but I have a few comments on the scenario—let me try to challenge the framing:

If the difficulty were to drop to 10%, a lot of the mining hardware that shut down would be profitable again.

The halving does not come as a surprise. Miners have considered the halving in their strategic planning and invested in new hardware accordingly. Miners first shut down their less profitable devices. As hashrate gets shut down, the remaining hardware becomes more profitable, and if there is any significant drop of the hashrate, slower blocks may increase the fee component of mining rewards.

This is also the fourth halving. Compared to prior halvings, a larger portion of the mining rewards is from fees, and a number of mining businesses have experience with prior halvings. The prior halvings, the difficulty went down at most for two difficulty adjustments less than 15% in total each time, and surpassed the hashrate prior to the halving after five difficulty adjustments at the latest.

I would be surprised if the hashrate were to drop more than 20%. I doubt that there will be many miners going out of business.

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Miners have long employed the strategy of reactivating mining rigs that were previously unprofitable but have become profitable again due to a drop in difficulty. I would not consider this an attack.

There was an occurrence of a significant hashrate and difficulty drop when the Chinese mining ban occurred, after the 2016 block readjustment, blocks came out normally at an average of 10 minutes.

This event shows that drops in mining hashrate and nation state bans do not affect bitcoin mining in any significant way and that restarting miners cannot be considered an attack.

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