David Canellis

Bitcoin is much bigger than just the blockchain. Bitcoin has its own raft of mining CEOs in orbit, as well as exchange-traded funds, media operations, venture capitalists and lobbyist groups.



Still, the Bitcoin “industry” exists on the same plane as hobbyists mining out of their garages and in DIY farms. Regular folk run full nodes to bolster the blockchain, others operate network monitors and other free services to make it more accessible.



All that’s a far cry from the billion-dollar public companies raising debt to hoover up mining rigs non-stop.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-outlook-for-public-miners">Financial trouble for bitcoin miners: A look back, and ahead as the halving looms&nbsp;</a>



Mining pools bridge these two very different worlds that exist within Bitcoin. Individual miners running a few ASICs in their basement can join a pool to hash alongside operators with thousands or rigs — and split any bitcoin mined based on the hash rate contributed.



While there are exceptions, an overwhelming majority of bitcoin is mined by pools. AntPool, Foundry and F2Pool are the <a href="https://coin.dance/blocks">biggest</a>, responsible for more than 63% of all blocks over the past week.



Blockworks caught up with bitcoin mining veteran Alejandro de la Torre to learn more about the dynamics of bitcoin <a href="https://blockworks.co/tag/mining">mining</a> and pools heading into the halving later this week.



De la Torre has worked for years in the bitcoin mining space, setting up mining operations across the globe. He led both BTC.com and Poolin as vice president and grew those two pools to be the largest for bitcoin global hash rate. Alejandro also worked for Block (formerly Square), assisting with the launch of the firm’s new bitcoin mining hardware.&nbsp;



De la Torre recently co-founded the first <a href="https://stratumprotocol.org/implementation/">Stratum v2</a> mining pool <a href="https://www.dmnd.work/">DEMAND</a>, improving security, efficiency and most importantly decentralization by allowing miners to build their own blocks — which he views as a key milestone in bitcoin decentralization efforts.



Keep reading for excerpts from Blockworks’ interview with de la Torre.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: What are the biggest concerns for mining pool operators around the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a>? If miners find it uneconomical to mine, could it reduce the number of effective pools?



De la Torre: Reduction of hash rate is the main concern for smaller pools. As they do not have much hash rate to rely on, any reduction from the mining industry due to the halving may be life threatening.&nbsp;



On that point, however, smaller pools tend to be whitelabels of larger pools, giving them a chance to survive the initial drop in hash rate and consequent build up. I still believe that smaller pools face some very hard months, let&#8217;s see.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-impact-on-at-home-miners">‘BTC will have to hit $79K’: At-home miners brace for the Bitcoin halving</a>



Halvings usually bring in great change in the pool industry, flushing out those pools that are not up to par. I think this change is a net-good for the bitcoin mining industry.&nbsp;


<div class="wp-block-image">
<figure class="alignright size-full is-resized"><img loading="lazy" decoding="async" width="400" height="400" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/04/86JvDFZZ_400x400.jpg" alt="" class="wp-image-84268" style="width:289px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/04/86JvDFZZ_400x400.jpg?w=400 400w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/86JvDFZZ_400x400.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/86JvDFZZ_400x400.jpg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/86JvDFZZ_400x400.jpg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/86JvDFZZ_400x400.jpg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/86JvDFZZ_400x400.jpg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/86JvDFZZ_400x400.jpg?w=80 80w" sizes="auto, (max-width: 400px) 100vw, 400px" /><figcaption class="wp-element-caption">DEMAND Mining Pool co-founder &amp; CEO Alejandro de la Torre&nbsp; </figcaption></figure></div>


Blockworks: Publicly-traded firms control somewhere around 20% of the hash rate. Are they all that important to bitcoin mining? How influential are they with regard to how pools are run?



De la Torre: Two public companies run their own pools, so yes they influence the pool space. Public companies are important to the ecosystem as they tend to be very large, commanding massive operations and hash rate.&nbsp;



However, I sometimes overestimate their importance. There is a very large amount of hash rate not controlled by public miners, all around the globe. I put more importance to these large private operations.



Blockworks: What’s your take on whether mining pools are a centralizing factor in bitcoin? Are participants in pools reactive enough to mitigate the unlikely scenario of collusion between pool operators, by leaving the offending pools to make 51% infeasible?



De la Torre: It’s concerning, this is why I decided to launch a built-from-the-bottom-up Stratum v2 pool.&nbsp;



Stratum v2 [a bitcoin mining protocol] will help decentralize bitcoin mining further by giving miners the ability to build their own blocks and add their own transactions. This right now, is done only by the pools, leading to the centralization in bitcoin mining.



Read more: <a href="https://blockworks.co/news/history-of-bitcoin-halvings-2">The history of Bitcoin halvings — and why this time might look different</a>



We need Stratum v2 and fortunately for miners, it&#8217;s here. This is the most important milestone in bitcoin mining for a very long time, in my opinion.&nbsp;



As for the 51% scenario, it is unlikely to happen, ever. Pools would be making their business obsolete if they attack bitcoin. Not to mention, it&#8217;s easy for a miner to switch pools, so a miner can monitor and act accordingly.&nbsp;



Blockworks: What is DEMAND aiming to change in bitcoin mining?



De la Torre: Give power back to the miners. Our goal aligns with the Bitcoin ethos: Continue the decentralization effort behind bitcoin mining. 



Read more: <a href="https://blockworks.co/news/bitcoin-halving-outlook-for-public-miners">Financial trouble for bitcoin miners: A look back, and ahead as the halving looms </a>



We are bitcoiners first and foremost. Filippo Merli, our chief technology officer, was the lead developer of the open-source Stratum v2 stratum reference implementation (SRI). I also helped out throughout the last two years. We know Stratum v2 and have plans to unlock its potential for the benefit of miners.&nbsp;



Aside from the security, efficiency and decentralization upgrades with Stratum v2, we will provide a transparent payment system. Usually, mining pools are a black box. With DEMAND, you&#8217;ll be able to verify all your “shares,” or accepted hash rate, you&#8217;ve sent to us. Don&#8217;t trust, verify&#8230;right?



Blockworks: If public mining companies only mine a relatively small percentage of all bitcoin, who are all the other miners? Private companies or individuals?



It&#8217;s a mix. Private companies have the largest chunk of that &#8216;other&#8217; hash rate. But we cannot underestimate the home/individual/solo mining of bitcoin. They represent a strong, ideological driven group. Vital, for the ecosystem. 



Read more: <a href="https://blockworks.co/news/state-of-bitcoin-development-ahead-of-halving">Here’s what the current state of Bitcoin development looks like ahead of the halving</a>



This is the reason why we have released a solo mining pool (now available). We do not intend to make any money from the solo pool. It&#8217;s there for this, honestly, badass group of miners.



Blockworks: What do you see happening with mining after the next halving? Is it headed towards consolidation or are there creative solutions being built?



De la Torre: Some consolidation will occur, without a doubt. This is a hell of an opportunity for those that know what they are doing.&nbsp;



Creativity and innovation is what I am excited about, every halving (this is mine and Filippo’s third) has seen an explosion of new companies coming out with solutions to problems and new ways to unlock potential.&nbsp;



There will be a lot of that in this halving. Especially since there are many more people working in this industry this time around.



This interview was edited for brevity and clarity.



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bitcoin halving

Halving Q&A: Solo bitcoin miners are ‘vital’ for the ecosystem

Casey Wagner

Bitcoin’s next halving event, where the reward for miners is cut in half, is slated to come any day now.&nbsp;



Historically, halving events have been followed by new all-time high prices for bitcoin, so traders are optimistic. But given bitcoin’s recent run, escalating geopolitical tensions, and an increasingly uncertain macroeconomic outlook, analysts say this time could be different.&nbsp;



Blockworks sat down with <a href="https://blockworks.co/tag/grayscale">Grayscale</a> researcher Michael Zhao to discuss the possible outcomes and get tips on what investors should be watching.&nbsp;



Keep reading for excerpts from Blockworks’ interview with Zhao.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: What does history tell us about halving cycles and pricing?



Zhao: While there have only been three halvings in the past, there tends to be a price increase after the halving after a few months. Given there’s a sample size of only three previous events, it&#8217;s hard to say that the price increase is due to the halving. The halving itself is already known to all market participants, so something like a decrease in issuance that’s already well-known theoretically shouldn’t impact the market at all.&nbsp;&nbsp;



Blockworks: What is different, if anything, about this <a href="https://blockworks.co/tag/bitcoin-halving">halving</a>? What impact will this have on pricing?&nbsp;



Read more: <a href="https://blockworks.co/news/state-of-bitcoin-development-ahead-of-halving">Here’s what the current state of Bitcoin development looks like ahead of the halving</a>



Zhao: The halving means the Bitcoin protocol is working exactly as it was programmed to. I think the only difference between this halving and the last halving is the different market dynamics between one: ETF flows representing a counter to an even lower issuance [and] two:<a href="https://blockworks.co/news/binance-ends-support-for-bitcoin-nfts"> increased activity around ordinals</a> and excitement surrounding Runes.&nbsp;



ETF flows seem to be a pretty straightforward story that’s been covered extensively; reducing the inflation rate by halving brings down potential sell pressure. While 3.125 BTC per block might seem like a small number, assuming there are around 52000 BTC produced annually post halving, at a price of $70,000, that’s $3.6 billion of potential sell pressure that is reduced annually. It adds up.&nbsp;



<a href="https://blockworks.co/tag/ordinals">Ordinals</a> and the Runes launch (Runes are essentially another standard for a fungible token on <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a>) will probably spike transaction fees on the day of the halving and will continue to see more and more interest from the crypto native crowd. I’m unsure if this will cause anything significant for price, but this activity will be beneficial for miners, who will see increased transaction fees.



Blockworks: We&#8217;ve seen increased institutional and retail interest in recent years, especially <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">with the launch of bitcoin ETFs</a>. How are these investors thinking going into the halving?&nbsp;



Read more: <a href="https://blockworks.co/news/etfs-helped-legitimize-bitcoin-halving-cme">ETFs helped ‘legitimize’ bitcoin ahead of halving: Q&amp;A</a>



Zhao: I think broadly that others think that price will increase post-halving, given what they’ve read or seen. I think they are probably right. I would caution them that they should study both the crypto and <a href="https://blockworks.co/news/empire-newsletter-start-to-bitcoin-halving-week">macro environments surrounding</a> each of the previous halvings and understand how those factors might have had a larger impact on Bitcoin’s price, more so than the halving itself.&nbsp;



Blockworks: The narrative around the halving seems to be price-positive, but are there potential downsides?



Read more: <a href="https://blockworks.co/news/bitcoin-halving-outlook-for-public-miners">Financial trouble for bitcoin miners: A look back, and ahead as the halving looms&nbsp;</a>



Zhao: It might be a stretch, but there seems to be a competition between the miners right now, where some players are trying to crowd out other players by increasing hash rate, selling bitcoin etc., making it less profitable to mine. While miners have become a smaller and smaller source of Bitcoin volume over time, <a href="https://blockworks.co/news/bitcoin-halving-btc-price-implications">the price of bitcoin could be impacted</a> by this sort of internal competition amongst miners. However, I expect that this won’t be that big of a deal long-term.



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bitcoin etf

Q&A: What to watch ahead of the Bitcoin halving 

Katherine Ross

The Bitcoin halving is looming, as the quadrennial event is expected to take place at the end of the week.&nbsp;



The halving, which marks the fourth such event in bitcoin’s history, will knock rewards down to 3.125 BTC per block from 6.25.&nbsp;



However, a lot has changed since the last time the rewards were halved in 2020 from the launch of the spot bitcoin ETFs to bitcoin notching new all-time highs just last month.



BitGo CEO Mike Belshe sat down with Blockworks ahead of the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> to discuss the overall market environment, bitcoin and the launch of the ETFs.&nbsp;



Read more: <a href="https://blockworks.co/news/etfs-helped-legitimize-bitcoin-halving-cme">ETFs helped ‘legitimize’ bitcoin ahead of halving: Q&amp;A</a>



Keep reading for excerpts from Blockworks&#8217; interview with Belshe.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: How is <a href="https://blockworks.co/tag/bitgo">BitGo</a> approaching the space post-bitcoin ETFs?



Mike Belshe: What we have found, as an industry, in the last year and a half to two and a half years, is that there&#8217;s a political thing going on that is influencing the interpretation of laws and regulations. And because of that, the traditional players are largely locked out. But all of a sudden, they&#8217;ve got the ETF vehicle, which has been approved. It&#8217;s the one shining light that they can definitely use without feeling like they&#8217;re putting their entire businesses at risk. It allows them to participate in Bitcoin, to provide access to their own clients for Bitcoin, and yet not necessarily have to take all of the exposures that they would have to take if they tried to do what BitGo does. So instead, they lean on BitGo to make that happen.



Blockworks: You guys have direct exposure to ETFs, correct?



Belshe: So we&#8217;re handling two of them so far. I think there are many more that you&#8217;ll be hearing about very soon. We provide all the regulatory compliance that [bitcoin ETF issuers] would need to expect. We’re regulated in three different states as a Trust Company. We&#8217;ve got South Dakota, New York and Wyoming now. And then, of course, we have money transmission licenses and other things that we do so we&#8217;re a very easy player for anybody that&#8217;s looking for that secure storage to work with.



Blockworks: Can you give some insight into the conversations that you&#8217;re having with these institutions following the <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">spot bitcoin ETF launches</a>?



Belshe: The business this year is just growing so fast. I actually think the institutions aren&#8217;t as much in as you would think. We have our existing institutional clients, and they&#8217;re all going to retail on their own — and that retail demand has been growing.



Some people are asking, ‘Where is this ETF demand coming from?’ And I think it&#8217;s still mostly retail demand — that is, retail clients going through Schwab, through TD Ameritrade. They’re going through their brokers and just now getting access to this asset class, which previously was just too hard to touch.



Read more: <a href="https://blockworks.co/news/2024-bitcoin-halving-new-era">The 2024 halving could usher in a new era for Bitcoin</a>



Now they just log in and buy. This is actually very good news for the industry, because there&#8217;s an endless amount of institutional demand, which we know is coming. So institutions are not yet in, and I believe they are coming, but the ETF was only approved in January…it&#8217;s not enough time for those evaluations to have been completed yet, which is why most of what we see so far is retail coming in. There&#8217;s some amount of the small hedge funds that are now coming in some amount of RAs can come in because they can make faster decisions and move quickly. And I think there&#8217;s a lot of headroom here for more demand.



Blockworks: We’ve heard similar things from Valkyrie, that some financial advisors, etc. are not quite ready to embrace the ETFs just yet, and that they need more time. Are you hearing similar rumblings?



Belshe: Some just need to see how bitcoin ETFs play out. The [Securities and Exchange Commission] was initially a no. Now they approved the products, but it’s not like these guys were like, ‘Great, the [bitcoin ETFs] are ready to go.’ A lot of them were on the sidelines, and now — even with the ETFs being launched — they need to see how it all shakes out.



Is it all going to go to BlackRock or to Fidelity, or heck, is Bitwise going to get some of this? Is it going to be really unstable? Is it going to get big really fast?



Read more: <a href="https://blockworks.co/news/bitcoin-halving-different-institutions-investors">This Bitcoin halving will be different — the institutions are here</a>



That&#8217;s all starting to shake out now. People are now looking at it and saying, ‘Yeah, this is a pretty robust ecosystem, the largest, fastest-growing ETF sector in the history of the market.’



Blockworks: Is this going to be a different halving than what we’ve seen before because of all the outside factors?



Belshe: I don&#8217;t tend to think about it in the short term. But long term, what is it really? Well, we have a distribution schedule for how new bitcoin [is] issued out into the world. That was put in motion all the way back in 2009. It hasn&#8217;t changed. That, by the way, is the first monetary policy in the history of humans that has been static for 15 years straight.



Humans can&#8217;t stop tinkering — the Fed changes things every quarter — and yet Bitcoin has managed to hold it steady by the exact same schedule that was put in place in 2009. It just shows the difference between what happens when you hand the rules over to the machines versus the emotions of people.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-outlook-for-public-miners">Financial trouble for bitcoin miners: A look back, and ahead as the halving looms&nbsp;</a>



You could ask the question: Why does it work this way? And that gets more into how do you build a currency of value without just giving yourself all the tokens. There are other currencies out there, like XRP, where Ripple gives themselves all the money to begin with, and then they say, ‘Come buy my coin.’ Alright, maybe some people are gonna do that and they&#8217;ve been fairly successful. Ripple still holds a chunk of XRP to this day. But it&#8217;s a lot harder to trust that, because you&#8217;re so dependent on Ripple and good stewardship of XRP.



And I’m not trying to say they haven’t been good stewards. I think they&#8217;ve been reasonably good. But with Bitcoin, they didn’t want that.



So instead, Satoshi Nakamoto put together this thing. I think it builds trust, and this is going to be just another milestone in building trust. Bitcoin is the one asset that&#8217;s going to do exactly what it said it was going to do, and not falter from the original plan.



This interview was edited for brevity and clarity.&nbsp;



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Despite bitcoin ETF approval, institutions are on the sidelines: BitGo CEO

Ben Strack

As the Bitcoin halving nears, miners express ongoing concerns about the potential need to shut down less efficient mining rigs due to reduced block rewards.



When the halving happens less than a week from now, the Bitcoin network’s per-block mining rewards will halve from 6.25 BTC to 3.125 BTC.



This impending reduction has led to worries about increased cost inefficiencies that may render smaller contributors unprofitable. These apprehensions are not new, having surfaced prior to past halving events as well.



In anticipation, a number of mining companies have sought to strengthen their balance sheets, deploy more efficient machines, and diversify their revenue streams to better withstand the upcoming changes.



However, some observers believe these fears are generally overblown. They point out that larger mining outfits have historically managed to adapt and thrive amidst the cyclical market fluctuations typically associated with block halvings.



They predict a similar <a href="https://blockworks.co/news/coinbase-primer-investors-bitcoin-halving">outcome for the upcoming cycle</a>, where initial disruptions may give way to a phase of price discovery, driven by the increased scarcity of Bitcoin.



This could potentially lead to higher Bitcoin prices, which would help to offset the reduced block rewards. That in turn may alleviate some of the financial pressures on miners and possibly restore profitability to their operations.



Read more: <a href="https://blockworks.co/news/miners-stockpiling-btc-before-halving">Miners keep adding to BTC stockpiles in homestretch before halving</a>



Industry giants like Marathon Digital and Riot Platforms seem to have a clear edge over most of their peers in at least one category; their balance sheets consist of more than $1 billion each in combined cash and BTC.



Chase White, a senior analyst at Compass Point Research &amp; Trading, previously said private miners without easy access to public markets capital are more likely to have to shut down operations in the aftermath of the per-block <a href="https://blockworks.co/tag/mining">mining</a> rewards cut.



Despite expecting “pain for everyone,” White added that miners carrying low or no debt, who pay the lowest amounts in terms of energy costs, and who are equipped with the most efficient mining fleets are likely to be fine.



Not all mining companies fit these criteria.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-impact-on-at-home-miners">‘BTC will have to hit $79K’: At-home miners brace for the Bitcoin halving</a>



And so, the question remains: Which firms will come out on the other side of the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> intact, and stronger?



<h2 class="wp-block-heading">Past financial troubles for miners</h2>



Several sources had trouble coming up with any major miners hurt badly by the last halving event four years ago.



According to Kayla Joyce, an associate at the law firm Holland &amp; Knight, the 2024 halving event differs from its predecessors in 2016 and 2020. She predicts it may lead to a wave of consolidation and defaults across the now matured space.



She did not disclose which firms she believes are most at risk, however.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-crypto-miner-consolidation">Bitcoin miner consolidation appears imminent as halving looms</a>



“The 2020 halving seemed to have less of an impact because the bitcoin mining industry was a smaller space prior to the 2021 crypto bull market,” Joyce told Blockworks. “Investors only started pouring money into the industry in 2021.”



Hardship across the mining sector was not primarily due to the 2020 halving, but rather resulted from the 2022 crypto winter. This downturn followed a period where mining firms accumulated substantial debt to fund aggressive growth initiatives.



Crypto mining data center operator Compute North <a href="https://blockworks.co/news/compute-norths-business-goes-south">filed for bankruptcy</a> in September 2022 after raising $385 million in debt financing that February. The company said in bankruptcy filings at the time that it owed as much as $500 million to at least 200 creditors.



<a href="https://blockworks.co/news/bitcoin-miner-core-scientific-to-file-bankruptcy-stock-tanks-30">Core Scientific then filed for bankruptcy</a> in December 2022. It noted at the time that while its cash flow was positive, it was insufficient to repay an equipment financing loan.



<a href="https://blockworks.co/news/core-scientific-emerges-from-bankruptcy">The Texas-based company emerged from bankruptcy</a> in January — reducing its net debt to $571 million by converting equipment lender and convertible note holder debt to equity.&nbsp;



Core Scientific CEO told Blockworks last month that going forward, the company intends to be more “pragmatic” on its infrastructure growth strategy and more “opportunistic” on the machine purchase side.



Read more: <a href="https://blockworks.co/news/adam-sullivan-core-scientific-bitcoin-halving">Core Scientific CEO: Machine buys, deleveraging key around Bitcoin halving</a>



Though Argo Blockchain did not go bankrupt amid the 2022 bear market, the London-based firm said late that year <a href="https://blockworks.co/news/argo-bankruptcy-still-on-the-table">it was looking to avoid such a fate</a> despite holding “insufficient cash” to sustain operations for much longer.



Argo mined 103 bitcoin last month and held digital assets worth the equivalent of 26 BTC ($1.82 million), as of March 31. Last month, the company also closed on the sale of its facility in Mirabel, Quebec for $6.1 million



It used the proceeds of the sale to repay the Mirabel facility&#8217;s remaining mortgage of $1.4 million and also paid back a portion of its outstanding debt to Galaxy Digital. Argo still owes Galaxy $12.8 million, down from its original $35 million debt balance to the company.&nbsp; &nbsp;



Overall, the company reduced its debt by $12.4 million during the first quarter, Argo Blockchain CEO Thomas Chippas said in a statement.



He added: “As we approach the halving, we continue to focus on streamlining our operations and running as efficiently as possible.”



<h2 class="wp-block-heading">A look at hash cost, miners’ fate this time around</h2>



Looking at the hash price and hash cost of public mining companies, it is clear that some are better positioned than others as they head into the halving.



Hash price takes bitcoin price, network difficulty, block subsidy and transaction fees into account. It <a href="https://data.hashrateindex.com/chart/bitcoin-hashprice-index">measures</a> the potential earnings a miner can expect from a specific quantity of hash rate. This is positively correlated with changes in BTC price and negatively associated with shifts in bitcoin mining difficulty.



Hash cost, though similar to hash price, offers a different perspective by measuring the cost to the miner.



Reducing hash cost — via improving efficiency by deploying newer machines or securing lower energy rates — has been a key focus for the segment’s firms as the halving looms.&nbsp;



The hash price for bitcoin stood at roughly $106 per petahash per second (PH/s) on Monday, according to Hashrate Index <a href="https://data.hashrateindex.com/chart/bitcoin-hashprice-index">data</a>. This figure takes into account intraday variations in price and transaction fees.



Wolfie Zhao, head of research at TheMinerMag, notes that the hash price will be cut in half after the halving, resulting in earnings of just over $50 per petahash per second (PH/s).



“In that scenario, most of the mining companies would still be mining with a gross profit, albeit much less than before,” he told Blockworks.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1898" height="1056" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=1024&amp;h=1024" alt="" class="wp-image-84117" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=1898 1898w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/04/TheMinerMag-Chart.png?w=80 80w" sizes="auto, (max-width: 1898px) 100vw, 1898px" /><figcaption class="wp-element-caption">Source: TheMinerMag</figcaption></figure>



Some of the publicly traded miners with a higher hash cost don’t have much debt on their balance sheet, Zhao noted. Companies with elevated debt-to-equity ratios — like Greenidge, Terawulf and Stronghold Digital — are on the lower end of the all-in hash cost scale, he added.



“So it looks like most of the public miners will survive the halving after having survived the highly levered bear market of 2022,” Zhao said.



<h2 class="wp-block-heading">Companies remain confident despite challenges&nbsp;</h2>



Bit Digital and Bitfarms had higher total hash costs than competitors during the fourth quarter, according to TheMinerMag data — amounting to about 74.2 PH/s and 70.3 PH/s, respectively.&nbsp;



Bit Digital CEO Sam Tabar told Blockworks in an email that the company plans to double the size of its fleet by the end of the year with more efficient miners.



The company may consider acquiring some of its hosting infrastructure to lower production costs. That decision “depends on the opportunity set and corresponding returns profile,” he added.&nbsp;



Beyond that, the company launched a business line in October that is focused on supporting <a href="https://blockworks.co/tag/artificial-intelligence">AI</a> workstreams.



“The margins are substantially better than our mining margins, and helps absorb all of our fixed overhead costs, making us more resilient to hash price volatility,” Tabar said.&nbsp;&nbsp;



Ben Gagnon, chief mining officer at Bitfarms, said that the company&#8217;s low-cost power contracts and energy efficiency strategies will ensure profitability even after the halving.



The Canadian miner agreed to buy nearly 36,000 Bitmain machines in November as part of what it called a “transformative fleet upgrade.” That process will help the company more than triple its hash rate and improve its energy efficiency by about 40%.&nbsp;



“With this plan we are strongly positioned to thrive and take advantage of what we believe will be the most bullish post-halving market the industry has ever seen,” Gagnon told Blockworks.



Joe Flynn, an analyst at Compass Point Research and Trading, wrote in an April 9 research note that Stronghold Digital Mining goes into the Bitcoin halving “in a more difficult position relative to other miners.” This is due in part to its debt and limited access to capital markets.



Stronghold’s infrastructure and access to power is valuable, however, Flynn noted, as companies will need such resources to plug in the hoards of mining machines they have already ordered. He added that selling some of that infrastructure could boost Stronghold’s stock, which was down about 48% year to date, as of Friday morning.&nbsp;&nbsp;



“We ultimately think there&#8217;s value in its assets that could be taken out through [mergers and acquisitions], as there is ability to take out [general and administrative expense] and lower Stronghold’s high overhead as a current small public company,” Flynn wrote.



Stronghold CEO Greg Beard told Blockworks that if Stronghold is deemed an attractive M&amp;A target by an industry peer, such a deal would be “something to consider.”&nbsp;



“Generally speaking, companies that are misunderstood by the public market that have actual attributes and value that can be valued by other public companies…tend to be realized in that way.”



Despite its debt, Stronghold’s vertically integrated structure gives it levers to pull around the halving, Beard said.&nbsp;



For example, last month the company shut down operations at one of its Pennsylvania plants to take advantage of lower electricity prices by importing power instead. It intends to keep that in effect “until it becomes economically compelling to run it relative to purchasing electricity,” the company said in a news release.



“I think the challenge for a lot of miners is that if their power contracts are structured in a difficult way, they’re forced to buy power at a negative margin,” Beard said. “We don’t have that issue.”



While Stronghold is a potential target to be acquired post-halving, Applied Digital has already been on the sell-side of pre-halving deals — agreeing to sell its facility in Garden City Texas last month to Marathon for $97.3 million.&nbsp;&nbsp;



Read more: <a href="http://v">Miner Marathon poised to acquire, expand after Bitcoin halving, exec says</a>



Applied Digital CEO Wes Cummins said in a statement that the company will focus on building out its HPC data centers.



“This strategic transaction represents a purposeful pivot, equipping the company to allocate financial and operational resources toward strategic sites in North Dakota, as well as bolstering our balance sheet strength,” Cummins said.&nbsp;



The company declined to comment further about its post-halving strategy.



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Financial trouble for bitcoin miners: A look back, and ahead as the halving looms 

Bessie Liu

The Bitcoin halving, a significant event in the world of Bitcoin, is drawing near and is anticipated to occur next week.&nbsp;



Bitcoin is intentionally designed to have a maximum supply of 21 million coins. This is to prevent inflation and ensure that the currency remains scarce.



For day-to-day bitcoin holders, the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> will have little or no impact on their lives. However, for bitcoin miners, the halving will reduce the rewards they earn for their work from 6.25 bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) to 3.125 BTC.&nbsp;



This means that bitcoin miners will inevitably receive a revenue cut following the event, and less efficient miners will likely be weeded out from accessing bitcoin rewards all together.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-inflation-and-issuance-schedule">Why is 2140 the end of bitcoin inflation?</a>



The initial hope of Satoshi Nakamoto, Bitcoin’s creator, was that Bitcoin would become well-adopted over time so that transaction fees could cover miners&#8217; operational costs. Though miners are beginning to earn more revenue through transaction fees, many remain concerned that transaction fees alone are <a href="https://blockworks.co/news/bitcoin-halving-impact-on-layer-2s%5C">insufficient</a> to keep miners on the network.&nbsp;



For this reason, many developers on <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> are looking to increase interest in the network by developing tools that will allow more users to join the blockchain ecosystem.



Read more: <a href="https://blockworks.co/news/mining-firms-prepare-for-bitcoin-halving">The Bitcoin halving is just weeks away — here’s how miners have prepared</a>



<h2 class="wp-block-heading">The resurgence of Bitcoin development</h2>



Mark Hendrickson, the general manager of bitcoin wallet, Leather, told Blockworks that there has been a resurgence of Bitcoin development over this past year.&nbsp;



“We saw it first, as a wallet provider, with Ordinals Protocol. Since that catalyst, we’ve witnessed Stamps, BRC-20, OP_CAT and now Runes just at the base layer. A lot of Bitcoin builders are now looking to scale through the expanding <a href="https://blockworks.co/tag/layer-2-2">layer-2</a> ecosystem, with the announcement of new layer-2s like Merlin and B² Network, and bigger innovation from well-established layer-2s, like Lightning Network and Stacks,” Hendrickson said.



Hendrickson noted that developers are currently looking for the best programmability around Bitcoin, and there have been promising signs of healthy competition in the ecosystem to unlock Bitcoin functionality.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-layer-2-impact-stacks">Q&amp;A: What will the Bitcoin halving mean for Bitcoin L2s?</a>



Jeremy Bruestle, the CEO and co-founder of RISC Zero, shared this sentiment. He added that there had also been a growing interest in introducing <a href="https://blockworks.co/tag/zero-knowledge-proof">zero-knowledge</a> (ZK) technology into the Bitcoin blockchain, and significant development resources have been allocated to innovating in the ecosystem.



&#8220;Addressing Bitcoin’s <a href="https://blockworks.co/tag/scaling">scaling</a> challenges, while ensuring on-chain verifiability and data availability, has been the holy grail of Bitcoin development for nearly a decade. Old scaling attempts compromised Bitcoin&#8217;s security, which is why ZK and Bitcoin are such a good technological pairing,” Bruestle said.



Bruestle notes that what we are seeing now is very much just the tip of the iceberg. He remarks that with teams adopting ZK technology on Bitcoin, the technology itself could enable what smart contracts are on Ethereum to the Bitcoin ecosystem.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-scaling-lightning">Bitcoin still has a scaling problem</a>



However, Hendrickson remains cautiously optimistic about the future. With the current pace of innovation development, Hendrickson believes there should be a focus on token standards over experiments in the Bitcoin ecosystem.



“We must provide security, safety and an easy user experience if we’re going to truly bring activities like DeFi, art collecting and more to Bitcoin,” he said.



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Bitcoin

Here’s what the current state of Bitcoin development looks like ahead of the halving

Companies have less than two weeks of mining bitcoin at the current per-block reward levels, and many aim to add to or maintain the BTC levels on their balance sheets.



Mining rewards are set to drop from 6.25 BTC per block to 3.125 BTC as part of the upcoming bitcoin halving. The occurrence, which takes place every four years or so, is slated to land on or around April 20.



Read more: <a href="https://blockworks.co/news/mining-firms-prepare-for-bitcoin-halving">The Bitcoin halving is just weeks away — here’s how miners have prepared</a>



Marathon Digital and Hut 8 have the biggest bitcoin piles among public <a href="https://blockworks.co/tag/mining">mining</a> companies, while Riot Platforms is close behind.&nbsp;



A bunch of industry firms intend to use their BTC holdings to fuel their growth in the coming months as some of their peers are expected to struggle.



<h2 class="wp-block-heading">Hoarding BTC ahead of buying opportunities</h2>



Florida-based Marathon mined 894 bitcoin in March, up 7% from February. It now holds 17,381 BTC on its balance sheet, which sits alongside $324 million in cash and cash equivalents.&nbsp;



The company’s cash and BTC amounted to nearly $1.6 billion combined, as of March 31. It will use the liquidity it is building “to capitalize on strategic opportunities, including industry consolidation,” the company said in a news release.&nbsp;



Marathon has already started to acquire sites, this week closing its $87 million buy of <a href="https://blockworks.co/news/marathon-digital-aquisition-bitcoin-halving">a Texas bitcoin mining facility</a> owned by Applied Digital.



Read more: <a href="https://blockworks.co/news/marathon-digital-2023-q4-earnings">Marathon Digital ready to deploy ‘dry powder’ in push to double hash rate</a>



Hut 8 produced 231 BTC in March — a 21% decrease from 292 BTC in February. The company, which merged with US Bitcoin Corp in November, now holds 9,102 BTC. This is slightly less than the 9,110 it held at the end of February.&nbsp;



Company CEO Asher Genoot <a href="https://blockworks.co/news/hut-8-diversification-around-bitcoin-halving">noted during an earnings call last week</a> that the size of Hut 8’s bitcoin treasury trails only MicroStrategy, Tesla, Coinbase, Marathon and Galaxy Digital, among public companies. The company said in a February statement that it planned to use its BTC reserves “to build balance sheet value and finance growth initiatives.”



Genoot told Blockworks last month that while Hut 8 would be evaluating buying opportunities, it was set to be “very cost-conscious” around the halving.&nbsp;



Read more: <a href="https://blockworks.co/news/hut-8-growth-bitcoin-halving">Hut 8 eyes growth around the Bitcoin halving — but not at all costs</a>



Riot Platforms mined 425 BTC in March — marking a slight dip from last month in terms of average bitcoin produced per day. It now holds 8,490 bitcoins on its balance sheet.&nbsp;&nbsp;&nbsp;



The Texas-headquartered company ended March with about $685 million of cash — giving it $1.3 billion of total liquidity on its balance sheet when including the BTC holdings.



Riot has bought tens of thousands of mining machines in recent months as part of <a href="https://blockworks.co/news/riot-plots-hash-rate-growth">its strategy to reach 100 exahashes per second (EH/s)</a> in mining capacity over the long-term. It spent $290 million to purchase roughly 66,000 machines from MicroBT in December before more recently <a href="https://blockworks.co/news/crypto-miners-hash-rate-bitcoin-halving">buying 31,500 more MicroBT miners</a> for $97.4 million in February.



CleanSpark produced 806 bitcoin in March, bringing its total bitcoin holdings to 5,021 as of March 31.



“Pair that with our current cash balance of over $300 million and we are well on our way to taking advantage of what we expect to be one of the most active merger and acquisition seasons ever experienced in our industry,” CleanSpark CEO Zach Bradford said in a statement.



The haul in the last full month before the halving marked a 24% increase from the 648 BTC it mined in February and marked a record for the company.&nbsp;



The feat came after CleanSpark completed the <a href="https://blockworks.co/news/crypto-miners-hash-rate-bitcoin-halving">acquisition of three data centers in Mississippi</a> in late February — a buy that was set to increase its operating hash rate by roughly 2.4 EH/s.



Segment observers have said <a href="https://blockworks.co/news/crypto-miner-consolidation-imminent-as-some-industry-players-struggle">consolidation in the miner space is imminent</a>, as small- to medium-sized firms with less access to capital could struggle. Bradford added that CleanSpark has the balance sheet to make the company “one of the most aggressive acquirers in the industry.”



While mining giant Core Scientific earned more bitcoin in March than its competitors, it has been selling more BTC than it has been producing in recent months.&nbsp;



Read more: <a href="https://blockworks.co/news/adam-sullivan-core-scientific-bitcoin-halving">Core Scientific CEO: Machine buys, deleveraging key around Bitcoin halving</a>



The company, which emerged from bankruptcy in January, mined 1,027 BTC and sold 1,114 BTC that month. It then mined 893 BTC in February and sold 952 BTC.&nbsp;



That trend continued in March, as the company produced and sold 906 BTC and 981 BTC, respectively.&nbsp;



“The terms of our emergence require that we sell all the bitcoin that we self-mine, so we don&#8217;t really hold bitcoin on the balance sheet,” a Core Scientific spokesperson told Blockworks in an email. “The portion of proceeds sharing rewards we receive from some of our hosting clients represents the additional bitcoin that we sell.”



Core Scientific CEO Adam Sullivan <a href="https://blockworks.co/news/adam-sullivan-core-scientific-bitcoin-halving">told Blockworks last month</a> the firm is set to focus on buying machines from struggling miners unable to afford parts of their existing orders after the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a>.



<h2 class="wp-block-heading">Smaller miners add to BTC inventories</h2>



Maryland-based Terawulf and Singapore-headquartered Bitdeer mined 379 BTC and 294 BTC in March, respectively. Both totals represented a very slight increase from February.



Meanwhile rival company Bitfarms mined 286 BTC last month, a 5% dip from the 300 BTC it had produced in February. It sold all but two of the bitcoin it produced in March.&nbsp;&nbsp;



The decrease was due in part to participation in curtailment programs, downtime associated with facility upgrades and a 4.8% increase in network difficulty, Bitfarms said in a company <a href="https://investor.bitfarms.com/news-events/press-releases/detail/234/bitfarms-announces-march-2024-production-and-operations">statement</a>.&nbsp;



The Canadian mining firm held 806 BTC — worth roughly $57 million on March 31 — and $66 million in cash.



Cipher Mining generated 316 BTC in March — down from 334 BTC the month prior — as the company also cited increased network difficulty.



The firm sold eight bitcoin last month, as its inventory now amounts to 1,741 BTC.



Meanwhile Hive Digital Technologies’ bitcoin stash increased to 2,287 bitcoin after it mined 224 BTC in March. The company held 2,315 BTC as of April 4, it said.&nbsp;&nbsp;



&#8220;Our HODL strategy is to have a healthy balance sheet similar to what we had for the last halving event in 2020,” Hive executive Chair Frank Holmes said in a statement.



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Miners keep adding to BTC stockpiles in homestretch before halving

One analyst nearly doubled his price target for MicroStrategy stock on Monday as industry watchers anticipate upward price action in the months after the imminent Bitcoin halving.



Mark Palmer, a senior equity research analyst for The Benchmark Company, said in a Monday research note that he had raised his price target for MicroStrategy (MSTR) to $1,875 per share.&nbsp;



The new mark is nearly double that of his $990 price target set for MSTR on Feb. 27. Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) climbed to <a href="https://blockworks.co/news/bitcoin-all-time-high">an all-time high above $69,000</a> about a week later, and would reach new heights after that.



<a href="https://blockworks.co/tag/microstrategy">MicroStrategy</a>’s stock price stood at $1,538 at 12:30 pm ET Monday — up 125% year to date and 8% higher than a month ago.&nbsp;



The $1,875 price target assumes bitcoin’s price rising to $150,000 by the end of 2025, Palmer wrote in the note. It stands above a $1,450 MicroStrategy price target made by TD Cowen analysts on March 20, a target that has not been revised since.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/cheatsheet-microstrategy-outperformed-nvidia">Cheatsheet: MicroStrategy has now outperformed Nvidia this year</a>



The Bitcoin <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> — when per-block rewards to bitcoin miners will drop from 6.25 BTC to 3.125 BTC — is scheduled to occur in less than two weeks. While the upcoming Bitcoin halving, like previous ones, is set to create a “supply shock,” the impact of this halving could be magnified given the demand for spot bitcoin ETFs, Palmer added.



The 11 US spot bitcoin ETFs held roughly 827,000 BTC as of April 3, according to BitMEX Research data. The fund category has notched net inflows of more than $12 billion since such offerings launched on Jan. 11.



“We expect the inflows into spot bitcoin ETFs to grow dramatically <a href="https://blockworks.co/news/etfs-helped-legitimize-bitcoin-halving-cme">once institutions begin to invest</a> in them in earnest,” Palmer wrote.



Industry watchers have pointed to the historical <a href="https://blockworks.co/news/history-of-bitcoin-halvings-2">upward trend of BTC after Bitcoin halvings</a>. 



Read more: <a href="https://blockworks.co/news/btc-price-action-all-time-high">BTC price dips after all-time high. Where is it headed next?</a>



Analysts at crypto exchange Bitfinex said in a Monday report that they — similar to Palmer — expect bitcoin to see a 160% post-halving price surge to above $150,000 in the next 14 months.&nbsp;



The Bitfinex analysts noted, however, that bitcoin achieving an all-time high ahead of this halving is an anomaly that “introduces a level of uncertainty into the market dynamics.”&nbsp;



“If the price of bitcoin rises after the halving, we would expect MicroStrategy to remain correlated with that price action,” said Dan Weiskopf, co-portfolio manager of the Amplify Transformational Data Sharing ETF (BLOK).



<h2 class="wp-block-heading">A growing bitcoin stack</h2>



MicroStrategy has increased its bitcoin holdings for 15 consecutive quarters, Palmer noted. He expects the company to continue collecting BTC using proceeds from capital markets transactions and excess cash generated by its enterprise software business.



The company held 214,246 BTC as of March 19. It most recently bought more than 9,000 BTC last month after proposing an offering of <a href="https://blockworks.co/news/microstrategy-second-convertible-senior-notes-offering">$500 million in convertible senior notes</a> due in 2031.



Read more: <a href="https://blockworks.co/news/bitcoin-salesmen-michael-saylor-larry-fink">Who’s the better bitcoin salesman: Larry Fink or Michael Saylor?</a>



Palmer said he estimates that MicroStrategy will hold 298,246 bitcoin by the end of 2025. This would represent a nearly 40% increase from its current bitcoin stack.



Lance Vitanza, managing director of equity research at TD Cowen, told Blockworks last year that he expects <a href="https://blockworks.co/news/microstrategy-bitcoin-buying#">MicroStrategy to continue buying BTC</a> when market conditions are attractive — based on BTC price and the price at which MicroStrategy can issue debt or equity securities.



Vitanza said in a March 20 research note that, given a $1.25 billion valuation of MicroStrategy’s operating software business, the market was imputing a 90% premium to the value of the company’s bitcoin holdings.&nbsp;



“Ultimately, we expect that any future contraction in the company&#8217;s bitcoin premium will over time be more than offset by a corresponding increase in the underlying price of bitcoin, as the seasoning of new ETPs continues to drive incremental bitcoin demand at the same time incremental supply of bitcoin falls by 50% due the halving of the bitcoin block reward expected this coming April,” Vitanza wrote at the time.



The premium valuation that the stock trades at presents an advantage for the company to continue to buy bitcoin on accretive basis, Weiskopf told Blockworks.&nbsp;



“After the quarter is reported, we would expect further convertible bond issuance since borrowing at less than 1% and selling stock through a convertible [note] with an additional premium over enterprise value is even more accretive than simply selling stock through an [at-the-market offering],” he added.



The stock trading at a premium to its net asset value is supported by several factors, Palmer argued.&nbsp;



“The most impactful of these is MSTR’s demonstrated ability to tap the capital markets at very attractive interest rates — the two convertible debt offerings the company executed during March had coupons of 0.625% and 0.875% — and then use the proceeds to purchase more bitcoin,” he said.



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What analysts say the Bitcoin halving is set to do for MicroStrategy stock

Jack Kubinec

The per-block rewards paid to bitcoin miners are set to be cut in half, from 6.25 to 3.125 BTC, later this month. The network’s fourth halving event presents a headache for even the best-resourced mining firms, but it could make thin margins even thinner for those running mining setups at home.



For miners, the formula is simple: If the halving drives up bitcoin’s price, their investment pays off. Otherwise, small miners could be left with dormant ASICs, energy bills and little chance of breaking even.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-btc-price-implications#:~:text=The%20previous%20halvings%20saw%20bitcoin,price%20didn't%20happen%20overnight.">How the halving could impact bitcoin&#8217;s price</a>



Some at-home miners <a href="https://www.reddit.com/r/BitcoinMining">laid</a> out the stakes in the r/BitcoinMining subreddit.



“I personally need it at 70k for my operation to break even after halving,” one poster wrote. Another said BTC would need to reach $79,000 to break even, and $140,000 to recapture their current profit margin.



“<a href="https://blockworks.co/tag/mining">Mining</a> isn&#8217;t really worth it these days and especially after the halving,” they <a href="https://www.reddit.com/r/BitcoinMining/comments/1bqn5yl/comment/kx4csac/?utm_source=share&amp;utm_medium=web2x&amp;context=3">wrote</a>.



There are other complicating factors besides price for DIY miners. One variable <a href="https://www.blockchain.com/explorer/charts/hash-rate">is</a> Bitcoin’s hash rate, which has grown at an increasing rate throughout the network’s history. The <a href="https://blockworks.co/tag/hashrate">hash rate</a> is essentially a measure of the amount of competition to mine Bitcoin blocks. Elevated electricity prices where miners live can make things more difficult, particularly as power grids in the US and elsewhere <a href="https://www.washingtonpost.com/business/2024/03/07/ai-data-centers-power/">buckle</a> under demand for compute-intensive AI.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-miners-hashrate-offline">20% of bitcoin network hash rate could go offline after halving: Galaxy</a>



Individual miners have very low odds of successfully mining bitcoin by themselves. Many opt to join mining pools which coordinate and share rewards among several miners, while also charging varying fees. This is all besides the fact that the prices of miners vary, and more-efficient ASICs are released over time.



At-home miners can punch these variables into online mining <a href="https://smokinghopium.io/#About">calculators</a> to try measuring their chances of profit, but some have given up hope altogether. Several forum posters have encouraged prospective miners to gradually purchase bitcoin over time instead, a process known as dollar cost averaging.&nbsp;



Two miners told Blockworks that using mining rigs for home heating was one avenue for making at-home mining profitable. ASIC miners emit heat as they run, and some Bitcoiners have developed means of capturing this heat and circulating it through their homes.



Read more: <a href="https://blockworks.co/news/bitcoin-mining-stocks-crypto-rally">Why most bitcoin mining stocks are down amid a persistent crypto rally</a>



“It makes one so much less price sensitive when you can mine AND eliminate a natural gas bill,” Canada-based at-home miner Antoine Desjardins, who produces heat from bitcoin mining, said in a direct message.&nbsp;



Ndgo, a pseudonymous miner who has published calculations on at-home mining profitability to their X page, told Blockworks that miners need to make use of <a href="https://blockworks.co/tag/asics">ASIC</a> heat for at-home mining to make sense in the long run.&nbsp;



But those already in the mining game likely <a href="https://blockworks.co/news/mining-firms-prepare-for-bitcoin-halving">won’t be deterred by the halving</a>, ndgo added.&nbsp;



“People have been planning for the halving, some since the last halving, many since last summer, [a] few since October-ish,” ndgo wrote. “Everybody knows it’s coming. Should be fine.”



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‘BTC will have to hit $79K’: At-home miners brace for the Bitcoin halving

Historically, every Bitcoin halving — a disinflationary mechanism inscribed in the currency’s code by Satoshi Nakamoto — has come a year or two before a new all-time high.



This is partly because a halving cuts the block reward paid to miners in half, reducing the number of new bitcoin being created and theoretically making bitcoin more scarce.



For example, with the latest halving to come, the block reward will fall from 6.25 bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) to 3.125 BTC.



The three previous <a href="https://blockworks.co/tag/bitcoin-halving">Bitcoin halvings</a> occurred in the run-up to an all-time high, which then gave way to a price drawdown — until the next halving helped ignite another rally, according to some market observers.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-markets-explainer">The next Bitcoin halving is coming. Here’s what you need to know</a>.



But the upcoming halving has broken that trend. For the first time in its history, bitcoin set an all-time price high in the immediate run-up to the halving when it <a href="https://blockworks.co/news/bitcoin-sets-all-time-high-71000">topped $70,000 this month</a>.&nbsp;



Blockworks examined how bitcoin’s price responded to prior halvings. Here’s what we found.&nbsp;



<h2 class="wp-block-heading">November 28, 2012: 50 BTC to 25 BTC</h2>



Nearly four years after Bitcoin’s <a href="https://blockworks.co/news/bitcoin-genesis-block-fifteeth-birthday">genesis block was mined</a>, the network underwent its first halving.&nbsp;



Bitcoin’s nascent community was unsure whether the supply slow-down would drive prices up, or if the halving was already priced in, as a then-teenaged Vitalik Buterin <a href="https://bitcoinmagazine.com/technical/block-reward-halving-a-guide-1354053560">laid</a> out in Bitcoin Magazine at the time. Bitcoiners <a href="https://bitcointalk.org/index.php?action=printpage;topic=127609.0">gathered</a> at meet-ups around the globe to ring in the halving.&nbsp;



Bitcoin, which had been trading for around $12 in the lead-up to the first halving in November 2012, jumped to $229 by April 2013, then climbed to roughly $1,132 by the following November, <a href="https://www.tradingview.com/chart/?symbol=BITSTAMP%3ABTCUSD">according</a> to TradingView.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2132" height="1224" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=1024&amp;h=1024" alt="" class="wp-image-82646" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=2132 2132w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=455 455w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=80 80w" sizes="auto, (max-width: 2132px) 100vw, 2132px" /></figure>



In the wake of the collapse of the Japan-based exchange Mt. Gox, bitcoin’s price would toil away in the hundreds of dollars range for the next three years.&nbsp;



<h2 class="wp-block-heading">July 9, 2016: 25 BTC to 12.5 BTC</h2>



By 2016, a host of new cryptocurrencies had cropped up. Shortly after the second halving, <a href="https://blockworks.co/tag/ethereum">Ethereum</a> would <a href="https://blog.ethereum.org/2016/07/20/hard-fork-completed">undergo</a> a hard fork in the wake of the catastrophic DAO hack.&nbsp;



Bitcoiners remained split on how the second halving would affect bitcoin’s price. “Right now, I&#8217;m disappointed,” a user <a href="https://bitcointalk.org/index.php?topic=1544493.0">wrote</a> on the BitcoinTalk forum a few hours before the block reward was cut in half.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-btc-price-implications">How the halving could impact bitcoin’s price</a>



Bitcoin’s price gradually rose for a few months after the second halving before picking up momentum in May 2017. By December 2017, bitcoin hit a new high of roughly $19,188, a market event that came a year and a half after the halving.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2132" height="1224" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=1024&amp;h=1024" alt="" class="wp-image-82647" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=2132 2132w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=455 455w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=80 80w" sizes="auto, (max-width: 2132px) 100vw, 2132px" /></figure>



<h2 class="wp-block-heading">May 11, 2020: 12.5 BTC to 6.25 BTC</h2>



By the third halving, Bitcoin was more than a decade old and had become more of a known commodity.&nbsp;



“Hey guys I think bitcoin is halving today, not sure if you&#8217;ve heard,” a new crypto exchange founder named Sam Bankman-Fried <a href="https://x.com/SBF_FTX/status/1259902307090612226?s=20">tweeted</a>. The markets publication of TD Ameritrade published a piece wondering whether the halving was already <a href="https://tickertape.tdameritrade.com/trading/bitcoin-halving-cryptocurrency-futures-18026">priced</a> in.&nbsp;



Once again, it wasn’t.&nbsp;



Bitcoin’s price rose from around $8,500 at the May 2020 halving to over $40,000 by January 2021. Bitcoin topped $63,000 in April before peaking above $67,000 in November 2021, nine years after the first halving.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2132" height="1224" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=1024&amp;h=1024" alt="" class="wp-image-82648" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=2132 2132w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=455 455w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=80 80w" sizes="auto, (max-width: 2132px) 100vw, 2132px" /></figure>



<h2 class="wp-block-heading">April 2024: 6.25 BTC to 3.125 BTC</h2>



It seems like a fool’s errand to question whether the next Bitcoin halving will lead to a price run at this point, but the circumstances are noticeably different this time around.&nbsp;



When the decade-long fight for the Securities and Exchange Commission’s approval on spot bitcoin ETFs <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">resolved in January</a>, bitcoin embarked on an ongoing bull run to an all-time high above $73,000.&nbsp;



This is uncharted territory for halvings, which previously came with bitcoin’s price far below its prior peak.



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The history of Bitcoin halvings — and why this time might look different

CME continues to see strong demand for bitcoin after the approval of spot bitcoin ETFs.&nbsp;



Ahead of the halving, CME&#8217;s head of crypto Giovanni Vicioso spoke to Blockworks about the new ETFs, the overall crypto market and the upcoming halving.&nbsp;&nbsp;



Vicioso <a href="https://blockworks.co/news/cme-still-hot-on-crypto">previously told Blockworks</a> that it was still seeing demand for crypto even after the Securities and Exchange Commission went after a number of crypto companies in 2023.&nbsp;



“More and more, you’re seeing clients, institutional clients, really start thinking more about the technology that underpins both bitcoin and ether, and they certainly see a lot more conversations on how that underlying technology can really drive innovation — things like tokenization for example…and I think that that’s really what’s driving interest in our products as well,” Vicioso told Blockworks in July of last year.



Read more: <a href="https://blockworks.co/news/2024-bitcoin-halving-new-era">The 2024 halving could usher in a new era for Bitcoin</a>



That demand, thanks to bitcoin touching fresh all-time highs and the January approval of the aforementioned ETFs, continues to hold steady.



Here’s what he told Blockworks.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: The bitcoin ETFs were launched just a few months ago, what kind of impact has it had on CME?



Vicioso: Since the launch of the spot bitcoin ETFs in the US, we’ve seen a sizable jump in terms of book volume and open interest. If we quickly look at our volumes so far, this year, cryptocurrency futures volume is averaging close to over 75,000 contracts. That&#8217;s more than double the [average daily volume] that we saw over the same period last year, and we&#8217;re trading close to $5 billion per day across the suite, more than and two times what we saw last year. 



What I will add, though, around what we&#8217;re seeing with the introduction of the spot bitcoin ETFs in the US, it’s not something that’s happened by chance. We&#8217;ve been building this market since 2016. With the introduction of the CME and CF benchmarks, bitcoin reference rate, and the introduction of futures in December of 2017, those products serve as the bedrock on which the ETFs are built. 



Read more: <a href="https://blockworks.co/news/history-of-bitcoin-halvings">The history of Bitcoin halvings — and why this time might look different</a>



I think that the ETFs are only really scratching the surface. We still haven&#8217;t seen some of the IRAs or sovereign funds get into this space. We&#8217;ll begin to see who&#8217;s actually investing in this space once the quarter ends and the 13Fs are filed.



Blockworks: All in all, it sounds like there’s a lot of appetite for your products?



Vicioso:&nbsp;Absolutely. The fact is that six of the 10 [bitcoin ETFs] are benchmarked to the CME and CF bitcoin reference rate in New York. If we take a look at the volume that we&#8217;re seeing, just in the 3 pm to 4 pm New York window, you know, [earlier this month] as an example, we averaged about a billion dollars a day in that hour alone, right? 



By comparison, last year we averaged about $1.6 billion per day, on average for the entire year. Earlier this month, we traded over a billion in just that one hour. Close to 20% of our volume is now transacted in that hour so there&#8217;s been a shift because the most popular hour used to be 3 pm to 4 pm London time, which coincides with the completion of the Bitcoin reference rate.&nbsp;



Blockworks: Let’s talk about scale. What’s it been like to go to $1 billion traded in an hour versus the $1.6 billion figure that you cited?



Vicioso: We&#8217;re averaging close to $5 billion a day. So certainly, the capacity for us to handle size is there. We offer reliable, regulated, highly liquid markets. If you look across the six other asset classes that CME covers, the e-mini S&amp;P is trading on average $200 billion to $300 billion per day on that contract alone. The scale, or the ability for that type of volume or for the volume that we&#8217;re currently seeing on our crypto suite, is there to support a lot more.



Blockworks: How do you think new ETFs, whether it’s an ETH ETF or another crypto ETF, will impact how CME approaches crypto?&nbsp;



Vicioso: We currently list ether futures. We have both standard contracts as well as micro contracts. We launched <a href="https://blockworks.co/news/cme-adds-ether-bitcoin-ratio-futures">ether/bitcoin ratio futures just last July</a>. And the story last year was was was all about bitcoin, right? A lot of it was driven by the anticipation of the approval of a spot ETF, so if you look at last year, bitcoin outperformed ether 11 out of 12 months. 



So far this year, ether has outperformed bitcoin every month so far this quarter. I think what we&#8217;re seeing there part of that is anticipation of the potential approval of a spot ether ETF, but some positive narratives are occurring with ether based on some of the developments for that particular blockchain that are now becoming more scalable. 



I think that there&#8217;s there&#8217;s good investor interest in something like in any potential ether ETF as well. Now, in terms of other ETFs, in our case we do list reference rates and real-time indexes covering a little bit more than 20 different coins and tokens, but in terms of introducing any additional futures, we need to see a bit more regulatory clarity before we move in that direction.&nbsp;



Blockworks: Are you seeing more optimism going into this halving than previous halvings?



Vicioso: Yeah, it&#8217;s interesting to see what&#8217;s happening right now. Is the price of bitcoin up for example, because of the existence of the ETFs or is it the opposite? Is price action in bitcoin driving, say, some of that interest in any ETFs? I think both of these things work together, where they help to continue to build that momentum. 



And there&#8217;s certainly been a lot of enthusiasm for the ETFs. We see new participants coming into the market and that&#8217;s helping those products to grow and I think it&#8217;s also helping price movement. And then of course, you throw in the halving and people start thinking about what&#8217;s happened in the past and they&#8217;ll think that this may repeat in the future. And it creates that proverbial snowball effect, if you will, where it keeps growing. But that remains to be seen.



Read more: <a href="https://blockworks.co/news/macro-driver-crypto-prices-bitcoin-etfs">ETF adoption set to keep driving bitcoin price: 10T’s Dan Tapiero</a>



Blockworks: Do you think post-halving you&#8217;ll see more enthusiasm, or do you think momentum will die down after?



Vicioso: I think it&#8217;s difficult to speculate, right? But when you see how much the market has grown, and you see how bitcoin’s dominance is getting stronger — it represents more than half of the overall cryptocurrency market cap — I think it&#8217;s just gotten too big to ignore. You hear some of the messaging that, for example, ETF providers are promoting in terms of allocating toward bitcoin. And that is just going to attract more interest. So I think it&#8217;s just a market that&#8217;s grown too big for investors to ignore.&nbsp;



Blockworks: When you&#8217;re having conversations with CME customers, can you enlighten us about the tone and general takeaways from those meetings?



Vicioso: If we go back to when we first launched the [crypto] product and we engaged with clients about interest in bitcoin, there was a lot of concern initially. Looking back at 2016-2017, firms didn&#8217;t quite understand what bitcoin was and didn’t necessarily appreciate the use case. But fast forward to conversations that we&#8217;ve had more recently and currently, we&#8217;re hearing more and more firms talking about things like tokenization. They’re also considering ways that they can implement some of that technology. 



So there&#8217;s been a real shift, and I&#8217;d say a positive shift, right, where institutions are now really considering not just trading cryptocurrencies, but also adapting the technology. Ultimately, I think, it&#8217;s about the use case that something like Bitcoin, or Ethereum bring to the table. That&#8217;s what drives value. And as that technology gets put into play, it&#8217;ll continue to drive interest in terms of other coins as well.



Blockworks: Do you think the SEC’s approval of the bitcoin ETFs and the way that they approached the approval, reassured institutions?&nbsp;



Vicioso: I think they do help to further legitimize the space, much like we did when we introduced bitcoin with a reference rate in 2016 and then futures in 2017. But having some of these well known names now also on the space just helps to bring more competence and attract interest in these types of products.



Blockworks: When you&#8217;re sitting down with your team, what do you guys look forward to this year?



Vicioso: We&#8217;re looking forward to continuing to grow and speak to clients to help them understand how they could use our products to help them manage some of this associated risk and gain exposure through our products



This interview was edited for brevity and clarity.



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ETFs helped ‘legitimize’ bitcoin ahead of halving: Q&A

Bitcoin was developed to emulate the scarcity and finite nature of resources like gold, thereby ensuring a limited supply. Satoshi Nakamoto, the founder of Bitcoin, intended that the maximum currency supply would be capped at 21 million coins. Every four years, the network cuts the reward for mining bitcoin transactions by 50% via a process known as the halving. This is meant to slow down the influx of new coins and preserve the currency&#8217;s scarcity over time. It also ensures that <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a>&#8216;s total finite supply approaches the 21 million cap gradually and predictably.



Following the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> next month, the block reward will be reduced to 3.125 bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>).



Given that the Bitcoin halving is just around the corner, <a href="https://blockworks.co/news/mining-firms-prepare-for-bitcoin-halving">concerns about mining revenue</a> have been top of mind. Blockworks consulted Rena Shah, the vice president of products and operations at Trust Machines — an infrastructure technology company that aims to expand Bitcoin capabilities — to see what she believes the halving means for Bitcoin <a href="https://blockworks.co/tag/layer-2-2">layer-2s</a>.



Keep reading for excerpts from Blockworks’ interview with Shah.&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: Why was Bitcoin designed to be halved every few years?



Shah: Bitcoin was designed to counteract inflation. The halving cycles maintain scarcity and allow for a lower available new supply to be matched by increased prices based on demand. Having worked through multiple halving events, it’s inspiring that the protocol still sets the rules after so many years into this experiment, and participants continue to listen. Bitcoin’s mission matters to its users.



Blockworks: Will miners continue to want to mine bitcoin if their rewards are halved?



Shah: We have around 10 years before newly minted BTC become relatively small incentives for miners. It’s been a focus of our mission at Trust Machines and the mission for advocating layer-2 scalability for Bitcoin.&nbsp;



Developing a robust BTC fee market through <a href="https://blockworks.co/tag/ordinals">Ordinals</a>, Runes and other activity from Bitcoin layers will give a clear path for long-term Bitcoin security and for <a href="https://blockworks.co/tag/mining">mining</a> incentives beyond newly minted BTC. Another part of the story is transaction fee revenue. It&#8217;s a vital stream that&#8217;s needed. Fresh BTC entering the market drops 50% every four years, and roughly in 12 years, these rates will effectively be zero.&nbsp;



The Bitcoin network will run mainly on transaction fees where miners will earn revenue from validation. The layer-1 will still be needed for high-value transactions, while micro-transactions will be pushed to cheaper and faster layer-2s.”



Blockworks: What does the Bitcoin halving mean for Bitcoin layer-2s, if anything?



Shah: The interest in and demand for Bitcoin <a href="https://blockworks.co/news/institutions-wallstreet-crypto-adoption-das-london">has already increased so much</a> in 2024 (spot ETF, ATH, etc.), and the halving events always attract attention from a wider audience. However, a billion people still cannot use Bitcoin <a href="https://blockworks.co/tag/layer-1">layer-1</a> directly.&nbsp;



The only path forward is layer-2s, the halving will just reinforce that need. Today&#8217;s market reality is that alternative layer-1s, think Ethereum, Solana and others, are better developed and more mature than Bitcoin layer-2s. They give users and developers a better experience and tools.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-impact-on-layer-2s">How will the Bitcoin halving impact Bitcoin L2s?</a>



Stacks’ Nakamoto release recently is proof that Bitcoin builders are rushing to develop solutions ahead of the halving. Further, with advances in BitVM-like approaches at the layer-1, the trust-minimization of layer-1 to layer-2 BTC movement can significantly improve far after the halving event.



Blockworks: What does the Bitcoin halving mean for <a href="https://blockworks.co/tag/stacks">Stacks</a>?



Shah: Stacks (<a href="https://blockworks.co/price/stx">STX</a>) is the only digital asset with a native BTC yield, with approximately $200 [million] in BTC yield going out to users this year, at current levels. Now add in even half the predicted interest that the Bitcoin halving will bring. You realize that we’re still early. As network usage grows and more users pay gas fees, the BTC yield increases, and the Bitcoin economy grows. Stacks is part of this positive economic loop.



The upcoming Nakamoto Release for Stacks will improve some mining inefficiencies, directly benefiting the BTC yield from consensus. The Nakomoto update fixes this, resulting in approximately 30-40% higher BTC yield per cycle.



This interview has been edited for brevity and clarity.



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Q&A: What will the Bitcoin halving mean for Bitcoin L2s?

Macauley Peterson

It’s well known that the Bitcoin network experiences a halving of supply approximately every four years. Less appreciated is that these are set to continue for over a century into the future.



Bitcoin’s pseudonymous creator Satoshi Nakamoto programmed the year 2140 — 30 halvings from now — as the year that the block rewards (the subsidy paid to miners for processing transactions into blocks) would drop to less than one satoshi, the smallest unit of bitcoin.



The use of the term &#8220;satoshi&#8221; — equivalent to 100 millionth of a bitcoin (or 0.00000001 BTC) — emerged organically among early Bitcoin users and developers, appearing in various forums and discussions starting in 2010 or 2011, and became widely accepted in 2013.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-price-implications">The Bitcoin halving is about a month away — here’s what you can expect</a>



The <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> is modeled after the physical <a href="https://blockworks.co/tag/mining">mining</a> of scarce resources, according to Jameson Lopp, co-founder and chief security officer at Casa.



“There’s nothing special about the year 2140,” Lopp told Blockworks. “It’s just how the nature of halvings along with the level of precision of satoshis ended up working out.”



Lopp notes that <a href="https://blockworks.co/tag/satoshi-nakamoto">Nakamoto</a> explained the supply schedule to Mike Hearn, a former Google engineer who became an early Bitcoin contributor, in 2009:



“My choice for the number of coins and distribution schedule was an educated guess,” Satoshi <a href="https://plan99.net/~mike/satoshi-emails/thread1.html">wrote</a>. “I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that&#8217;s very hard.”



Read more: <a href="https://blockworks.co/news/satoshi-emails-elaborate-bitcoin-origin">Satoshi warned against labeling bitcoin as an ‘investment’</a>



He picked 21 million, but Satoshi added that the divisibility of a bitcoin in practice could be represented differently depending on how valuable one bitcoin gets. “For example, if 0.001 is worth one euro, then it might be easier to change where the decimal point is displayed, so if you had one bitcoin it&#8217;s now displayed as 1000, and 0.001 is displayed as one.”



For what it’s worth, 0.001 BTC is worth about 65 euros (approximately $70) today.



Why the rate of issuance would decline for 132 years, however, was never explained.



“I expect it was more of a ‘better safe than sorry’ decision to give the system decades to bootstrap,” Lopp said.



Unless the price of bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) doubles every four years, each halving brings less income from block rewards to miners. So to maintain the network’s <a href="https://blockworks.co/tag/hashrate">hashrate</a>, which is important for Bitcoin’s security, transaction fees will become more important over time.



Whether that will happen in practice remains to be seen, but Lopp is optimistic.



“I expect that as we see the multi-layered Bitcoin ecosystem continue to expand, the base chain will start to look more and more like a high-value cryptographic accumulator and it will make economic sense for on-chain transactions to pay relatively high fees,” he said.



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Why is 2140 the end of bitcoin inflation?

Bitcoin’s next halving event is expected to happen sometime in the second half of April.&nbsp;



But nobody knows exactly when the network milestone will occur.



It could happen on April 20, which would make for another tasty hit of serendipity during what’s already been a fortuitous bull market for bitcoin.&nbsp;



Other portals counting down the halving say it could happen a few days earlier.&nbsp;



Block reward halvings cut the supply of new bitcoin by 50%, and through either allegiance to fractals or mere superstition, they’re considered catalysts for price growth and a bedrock for BTC’s perceived four-year market cycles. 



Read More: <a href="https://blockworks.co/news/history-of-bitcoin-halvings">The history of Bitcoin halvings — and why this time might look different</a>



Slashing issuance by half spiritually overhauls the fundamentals of supply and demand for bitcoin. <a href="https://blockworks.co/tag/bitcoin-halving">Halvings</a> don’t affect the overall difficulty of bitcoin <a href="https://blockworks.co/tag/mining">mining</a>, they just reduce the reward — effectively doubling the cost of bitcoin production.



The importance of halvings suggests we should understand the specific time and date for their occurrence. Pinpointing an exact time and date for the halving is, however, impossible.



<ul class="wp-block-list">
<li>Satoshi Nakamoto opted to cut Bitcoin’s issuance in half every 210,000 blocks.</li>



<li>They set protocols to ensure blocks are found every 10 minutes on average.</li>



<li>It takes about 2.1 million minutes to mine 210,000 blocks, which converts to around four years.</li>
</ul>



Every block has its own unique hash, a 64-digit hexadecimal string, which miners must find to win the right to add the block to the chain and reap the reward. That reward, currently 6.25 BTC, is soon to be 3.125 BTC.



Miners run specialized machines — application-specific integrated circuits (ASICs) — capable of producing trillions of hashes per second. More machines means more trillions of hashes, which over time should convert to more bitcoin mined, despite its randomness (thus is the industrialized bitcoin mining industry we know today).



Read more: <a href="https://blockworks.co/news/solo-bitcoin-miner-solves-block">As crypto burns, solo bitcoin miner wins BTC ‘lottery’</a>



Finding blocks is a stochastic process. Sometimes they take seconds to find — other times, hours. This unpredictability is exactly why it’s not feasible to know when the next block will hit, let alone the next halving.



Still, the rate of discovery is influenced by what’s known as the global block difficulty. After every 2,016 blocks, <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> calculates how long it took to discover that set and makes it either harder or easier to mine blocks.



“If the previous 2,016 blocks took more than two weeks to find, the difficulty is reduced. If they took less than two weeks, the difficulty is increased. The change in difficulty is in proportion to the amount of time over or under two weeks the previous 2016 blocks took to find,” <a href="https://en.bitcoin.it/wiki/Difficulty#What_is_.22difficulty.22.3F">per</a> the long-serving Bitcoin community wiki.



Read More: <a href="https://blockworks.co/news/bitcoin-halving-price-implications">The Bitcoin halving is about a month away — here’s what you can expect</a>



In effect, a higher difficulty means fewer potentially correct hashes for miners to randomly guess. So, it takes longer to find the right one to successfully mine a block. And vice versa.



Because difficulty is only adjusted every two weeks, block production can still speed up over extended periods of time, especially when there are a lot of machines directed at the chain.&nbsp;



If Bitcoin were to strictly add blocks every 10 minutes, then 144 BTC would be mined every day. Over the past year, 147 blocks have been added on <a href="https://blockworks.co/news/bitcoin-halving-expected-on-4-20">average</a>, largely on account of record-high hash rate.



All this to say, it’s impossible to know when the next halving, and any halving after that, will occur exactly, due to the random nature of bitcoin mining. It’s just not something you can set your clock to. But you can bet it’s on its way.



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Why we have no idea exactly when the next Bitcoin halving will happen

The Bitcoin halving is roughly a month away. 



It’s set to take place on or around April 20, though the exact date won’t become clear until it’s closer. The quadrennial event takes place every 210,000 blocks, this time at block 840,000.



Following the halving, the amount of bitcoin awarded to miners will be, well, halved: Mined bitcoin rewards will drop to 3.125 per block, down from 6.25.



The last halving occurred in 2020 when the rewards dropped from 12.5 bitcoin per block to 6.25. 



<h2 class="wp-block-heading">What’s different this time?</h2>



This will be the fourth <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> in the history of Bitcoin, but it is unique for a couple of reasons. First and foremost is it follows the <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">newly-launched bitcoin ETFs</a>. 



The Securities and Exchange Commission only approved the bitcoin ETFs in January, meaning that they’ll only be a few months old by the time the halving happens.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-markets-explainer">The next bitcoin halving is coming. Here’s what you need to know</a>



The other reason is that bitcoin has never before carved out new all-time highs ahead of a halving. Bitcoin’s recent historic run-up puts this halving in completely uncharted territory.&nbsp;



ICYMI: Earlier this month, bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) notched a <a href="https://blockworks.co/news/bitcoin-btc-all-time-high-70k">new all-time high</a> for the first time since 2021.



<h2 class="wp-block-heading">What to expect</h2>



For the halving itself? Not much. It’s a fun event, but it won’t have a serious impact on most watchers or holders in the short term — if <a href="https://blockworks.co/news/history-of-bitcoin-halvings">history repeats itself</a>. However, the previous halvings have led to movement in bitcoin’s price in the months post-halving. 



Lucas Kiely, chief investment officer of Yield App, thinks that <a href="https://blockworks.co/news/cheatsheet-bitcoin-entering-danger-zone">bitcoin could enter a “danger zone”</a> ahead of the halving, and see a price drawdown of up to 20%. Bitcoin, after hitting multiple new all-time highs, lost a lot of the positive momentum sending it higher.&nbsp;



There’s not a clear trend revealing how bitcoin may react directly after the event occurs — especially considering how vastly different this year has been from the past halvings.&nbsp;



Read more: <a href="https://blockworks.co/news/history-of-bitcoin-halvings">The history of bitcoin halvings — and why this time might look different</a>



But in the long run, as Komodo’s Chief Technology Officer Kadan Stadelmann previously noted, the halving creates “<a href="https://blockworks.co/news/bitcoin-halving-btc-price-implications">a scarcity that tends to increase its value</a>.”



Uncertainty won’t prevent analysts and commentators from looking into what happens post-halving.



<h2 class="wp-block-heading">How bitcoin could be impacted&nbsp;</h2>



JPMorgan analysts, in a note last month, <a href="https://blockworks.co/news/jpmorgan-bitcoin-halving-publicly-traded-miners">predicted that bitcoin’s price could dip to $42,000</a> after the halving. Historically, the halvings have occurred when bitcoin was below its previous peak, and the previous three did lead to bitcoin carving out bull runs in the months after the halvings, though not immediately.&nbsp;



The analysts also noted that continued price appreciation could be a boon for publicly listed bitcoin miners, such as Marathon, Riot, Griid, Cipher and Core Scientific among others, even as their cost of production doubles.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-mining-implications">What happens during the bitcoin halving?</a>



The analysts believe that the miners with “below average electricity costs” and better rigs could survive as others struggle.



Miners could see further consolidation in the space, with bigger players like Marathon <a href="https://blockworks.co/news/marathon-digital-aquisition-bitcoin-halving">making pre-halving moves</a>. The publicly traded miner bought another site in an $87 million deal earlier this month.&nbsp;



Riot and CleanSpark also made their own <a href="https://blockworks.co/news/crypto-miners-hash-rate-bitcoin-halving">moves earlier this year</a>. CleanSpark acquired three new facilities and Riot bought more mining machines.&nbsp;



While JPMorgan went low in their estimates post-halving, others see bitcoin carving out new all-time highs by the end of this year.



Standard Chartered, in a note, said that bitcoin could hit $150,000 by the end of this year. While the analysts didn’t dig into the past action of bitcoin post-halving, part of their thesis comes from the fact that after the halving, bitcoin miners “new supply will fall to 450 BTC per day, [and] the same amount of ETF buying will be equivalent to 5x new supply.”



Binance CEO Richard Teng, speaking at an event, <a href="https://blockworks.co/news/cheatsheet-bitcoin-entering-danger-zone">reportedly said he could see bitcoin surpassing $80,000</a> by the end of the year. Teng previously expected bitcoin to top out at $80,000.



Teng, in a post on X, <a href="https://twitter.com/_RichardTeng/status/1769740328192311337">acknowledged</a> the vast difference in his call versus Standard Chartered’s, adding, “I have always been conservative.”



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The Bitcoin halving is about a month away — here’s what you can expect

Historically, every Bitcoin halving — a disinflationary mechanism inscribed in the currency’s code by Satoshi Nakamoto — has come a year or two before a new all-time high.



This is partly because a halving cuts the block reward paid to miners in half, reducing the number of new bitcoin being created and theoretically making bitcoin more scarce.



For example, with the latest halving to come, the block reward will fall from 6.25 bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) to 3.125 BTC.



The three previous <a href="https://blockworks.co/tag/bitcoin-halving">Bitcoin halvings</a> occurred in the run-up to an all-time high, which then gave way to a price drawdown — until the next halving helped ignite another rally, according to some market observers.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-halving-markets-explainer">The next Bitcoin halving is coming. Here’s what you need to know</a>.



But the upcoming halving has broken that trend. For the first time in its history, bitcoin set an all-time price high in the immediate run-up to the halving when it <a href="https://blockworks.co/news/bitcoin-sets-all-time-high-71000">topped $70,000 this month</a>.&nbsp;



Blockworks examined how bitcoin’s price responded to prior halvings. Here’s what we found.&nbsp;



<h3 class="wp-block-heading">November 28, 2012: 50 BTC to 25 BTC</h3>



Nearly four years after Bitcoin’s <a href="https://blockworks.co/news/bitcoin-genesis-block-fifteeth-birthday">genesis block was mined</a>, the network underwent its first halving.&nbsp;



Bitcoin’s nascent community was unsure whether the supply slow-down would drive prices up, or if the halving was already priced in, as a then-teenaged Vitalik Buterin <a href="https://bitcoinmagazine.com/technical/block-reward-halving-a-guide-1354053560">laid</a> out in Bitcoin Magazine at the time. Bitcoiners <a href="https://bitcointalk.org/index.php?action=printpage;topic=127609.0">gathered</a> at meet-ups around the globe to ring in the halving.&nbsp;



Bitcoin, which had been trading for around $12 in the lead-up to the first halving in November 2012, jumped to $229 by April 2013, then climbed to roughly $1,132 by the following November, <a href="https://www.tradingview.com/chart/?symbol=BITSTAMP%3ABTCUSD">according</a> to TradingView.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2132" height="1224" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=1024&amp;h=1024" alt="" class="wp-image-82646" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=2132 2132w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=455 455w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/Nov-2012-1.png?w=80 80w" sizes="auto, (max-width: 2132px) 100vw, 2132px" /></figure>



In the wake of the collapse of the Japan-based exchange Mt. Gox, bitcoin’s price would toil away in the hundreds of dollars range for the next three years. 



<h3 class="wp-block-heading">July 9, 2016: 25 BTC to 12.5 BTC</h3>



By 2016, a host of new cryptocurrencies had cropped up. Shortly after the second halving, <a href="https://blockworks.co/tag/ethereum">Ethereum</a> would <a href="https://blog.ethereum.org/2016/07/20/hard-fork-completed">undergo</a> a hard fork in the wake of the catastrophic DAO hack.&nbsp;



Bitcoiners remained split on how the second halving would affect bitcoin’s price. “Right now, I&#8217;m disappointed,” a user <a href="https://bitcointalk.org/index.php?topic=1544493.0">wrote</a> on the BitcoinTalk forum a few hours before the block reward was cut in half.



Read more: <a href="https://blockworks.co/news/bitcoin-halving-btc-price-implications">How the halving could impact bitcoin’s price</a>



Bitcoin’s price gradually rose for a few months after the second halving before picking up momentum in May 2017. By December 2017, bitcoin hit a new high of roughly $19,188, a market event that came a year and a half after the halving.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2132" height="1224" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=1024&amp;h=1024" alt="" class="wp-image-82647" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=2132 2132w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=455 455w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/July-2016.png?w=80 80w" sizes="auto, (max-width: 2132px) 100vw, 2132px" /></figure>



<h3 class="wp-block-heading">May 11, 2020: 12.5 BTC to 6.25 BTC</h3>



By the third halving, Bitcoin was more than a decade old and had become more of a known commodity. 



“Hey guys I think bitcoin is halving today, not sure if you&#8217;ve heard,” a new crypto exchange founder named Sam Bankman-Fried <a href="https://x.com/SBF_FTX/status/1259902307090612226?s=20">tweeted</a>. The markets publication of TD Ameritrade published a piece wondering whether the halving was already <a href="https://tickertape.tdameritrade.com/trading/bitcoin-halving-cryptocurrency-futures-18026">priced</a> in.&nbsp;



Once again, it wasn’t.&nbsp;



Bitcoin’s price rose from around $8,500 at the May 2020 halving to over $40,000 by January 2021. Bitcoin topped $63,000 in April before peaking above $67,000 in November 2021, nine years after the first halving.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2132" height="1224" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=1024&amp;h=1024" alt="" class="wp-image-82648" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=2132 2132w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=455 455w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2024/03/May-2020.png?w=80 80w" sizes="auto, (max-width: 2132px) 100vw, 2132px" /></figure>



<h3 class="wp-block-heading">April 2024: 6.25 BTC to 3.125 BTC</h3>



It seems like a fool’s errand to question whether the next Bitcoin halving will lead to a price run at this point, but the circumstances are noticeably different this time around. 



When the decade-long fight for the Securities and Exchange Commission’s approval on spot bitcoin ETFs <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">resolved in January</a>, bitcoin embarked on an ongoing bull run to an all-time high above $73,000.&nbsp;



This is uncharted territory for halvings, which previously came with bitcoin’s price far below its prior peak.



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John Gilbert

metaverse

Mastering NFTs: From Beeple to Starbucks to Digital Twin Cities

James Cirrone

As blockchain technology continues to evolve, the security of digital assets remains a top concern. For years, private keys have been the backbone of wallet security, with the key holder being the only one able to access the contents of the <a href="https://blockworks.co/news/what-is-a-crypto-wallet">wallet</a>. However, the methods for storing and protecting these keys have undergone significant changes over time. 



Initially, users were responsible for securing their raw private keys. These were long and complicated strings of characters that were difficult to remember and easy to mistype or lose. 



Read more: <a href="https://blockworks.co/news/what-is-a-crypto-wallet">What Is a Crypto Wallet? All You Need To Know</a>



Next came the era of <a href="https://blockworks.co/news/what-are-seed-phrases">seed phrases</a> — a series of 12 or 24 random words that allowed users to recover their assets if their chosen wallet front end was disabled, lost or stolen. These were not particularly ideal either, as they remained vulnerable to phishing, brute-forcing, dictionary attacks, and more.



MPC wallets are a more recent attempt to secure people’s crypto. Multi-party computation, or MPC, <a href="https://blockworks.co/tag/wallets">wallets</a> do away with the traditional concept of user-facing private keys entirely, replacing them with a process that involves breaking up a holder’s key into different pieces, called shards. While this purportedly &#8220;seedless&#8221; approach is a significant departure from traditional key security, some implementations of MPC wallets may still utilize seed phrases as an additional backup or recovery option for added security.



MPC wallets also allow users to define the required number of shards needed to authorize a wallet&#8217;s transactions, whether it&#8217;s two, three or more. As a result, advocates of MPC wallets say they provide a more robust and flexible solution for securing digital assets, effectively mitigating risks associated with loss, theft or unauthorized access.



Past solutions have held similarities to MPC wallets, but with a few important distinctions. For instance, <a href="https://blockworks.co/news/what-are-multisig-wallets">multi-signature wallets</a> need several signatures to initiate transactions. Similar to MPC shards, users may distribute these signatures among multiple parties or locations, reducing centralized failure risks. However, they lack the recovery options of MPC wallets and rely mainly on seed phrases and private key possession to maintain their advantage.



Read more: <a href="https://blockworks.co/news/what-are-seed-phrases">What Are Seed Phrases and Are They Necessary?</a>



Rohan Agarwal is the CEO and co-founder of Cypherock, a hardware MPC solution. He told Blockworks that certain MPC wallets, especially those relying on software or web apps, trade a high level of security for increased ease of use.



Instead, Cypherock allows users to keep all their shards offline using a hardware device, similar in form to <a href="https://blockworks.co/news/cold-wallets-secure-crypto-custody">cold storage solutions</a> like Ledger and Trezor. Agarwal said, “With most of the software wallets…people are more inclined towards convenience, and that&#8217;s why you have hardware wallets and solutions like ours which is a privatized sort of security for keeping most of your assets.”



With Cypherock’s MPC solution, the user’s key is split into five shards. One is the hardware wallet and the other four are NFC-enabled cards. Users can optionally choose a PIN number to add across all shards as an extra layer of security. To send a transaction, a user requires only a single card and the hardware wallet.



Having multiple cards means that even if a user loses three of the five, they can still transact and access their funds with the one remaining card and the hardware wallet, Agarwal told Blockworks. He added that if your hardware wallet becomes inaccessible, any two private key shards can be used to restore the wallet account on a new device.



Agarwal also told Blockworks that Cypherock customers get to decide how to keep their private keys safe. He said that users most concerned with security often split the cards up between different locations — sometimes even in different countries. Others tend to keep one card and the hardware wallet in their home, while keeping the rest of the cards in bank lockers or with trusted individuals like friends and family.



There are also software-based MPC wallet alternatives. ZenGo is one example. Utilizing MPC and threshold signatures, ZenGo divides the user&#8217;s private key into two shards: one held by the user and the other by the company on its secure servers. To initiate a transaction, both parties collaborate to generate a valid signature, ensuring that neither can independently access or control the user&#8217;s funds. 



For account recovery, ZenGo employs a unique biometric-based &#8220;face map&#8221; created during wallet setup, which serves as an encrypted backup recovery mechanism. Users can regain access to their funds using their face map, which remains inaccessible to ZenGo, helping users to maintain control over their assets.



Trust Wallet, powered by wallet-as-a-service infrastructure provider Web3Auth, is another recent entrant in the MPC wallet space. Its software MPC solution offers users five authentication factors, of which any two are required to access a user’s assets. These factors include a manual backup of the device key shard, login to an online account (Google, Apple, Telegram, Discord), device authentication, SMS one-time passcode, and a recovery email.



Zhen Yu Yong, co-founder and CEO of Web3Auth, stressed that users can pick and choose which authentication method works best for them.



Yong acknowledged that, although SMS is a popular and user-friendly option, it can be vulnerable to attacks like SIM swapping. Hackers have demonstrated this attack vector numerous times, including in <a href="https://blockworks.co/news/att-crypto-sim-swap-lawsuit">the theft of $24 million worth of crypto from investor Michael Terpin</a> in 2017. Despite this, he said that Web3Auth aims to emulate Web2 banking apps by offering SMS and email as common recovery methods.



“[Users] can choose to use SMS OTP or they can choose to use a manual backup or google authenticator, or other alternatives,” Yong said. “SMS OTP definitely still remains as the most friendly user experience.”



Yong explained that &#8220;users have always been stuck in the dichotomy of you either go with seed phrases and be self custodial…or you go and purchase a hardware wallet. I think with MPC, it&#8217;s kind of like a new account type.&#8221;



Agarwal agreed that SMS one-time passcodes are convenient, but added that with SIM-based recovery methods “you are not in control. It&#8217;s the telecom provider who is basically authenticating you.”



While MPC wallets offer a number of advantages in terms of flexibility and security, it is crucial to consider the potential drawbacks and challenges associated with their implementation and use. One concern is the possibility of collusion among shard holders, which could lead to unauthorized access of a given wallet&#8217;s funds.



Additionally, the complexity of the technology may result in user confusion and errors, especially for those unfamiliar with the concept of key sharding and recovery procedures. It is essential for users to carefully weigh the benefits and drawbacks of using MPC wallets, and to consider their specific needs and preferences when choosing the most appropriate solution for securing their digital assets.



Trust Wallet declined to speak to Blockworks about its new MPC offering until it’s made generally available.



Jeff Albus and John Gilbert contributed reporting.



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security

MPC Wallets Have a Trade Off. Is It Worth It?

John Lee Quigley

Many NFT projects are strategizing ways to kickstart the next market cycle.&nbsp;



The latest Doodles 2 announcement is an endeavor to extend adoption through the world of Web3 media. And NFT marketplace Blur is working to lower barriers to traders through 0 fees and lending options.&nbsp;



So while the market may still be in hibernation, investors are finding exciting reasons to own digital assets. Here, we will revisit why many make the purchase and explain how to buy an NFT.&nbsp;



<h2 class="wp-block-heading">Should you buy an NFT?</h2>



There are many reasons to say why you bought something. But oftentimes, the driving impetus behind a purchase is different from what we tell people. This phenomenon is more apparent with NFTs. Explanations for these purchases abound and often change to justify them to others.&nbsp;



To help you make a decision you can confidently justify, let&#8217;s explore the primary reasons (or reasons to say) people buy NFTs.



<h3 class="wp-block-heading">The artist-first business model</h3>



We often hear that the true value behind these digital assets is creator empowerment and a new monetization model. While this in one sense appears true, most investors and collectors don’t buy NFTs to support the artist.&nbsp;



If that were to be their primary intent, they would donate directly. Expression and speculation is the key motivation behind buying digital art. It not only puts food on the creator’s table, it breathes mimetic desire (mimicking the desire of others) into the creation. Our latest <a href="https://blockworks.co/news/nft-investing-guide">NFT investing</a> guide explains the psychology in greater detail.&nbsp;



What makes these purchases different from buying a JPEG is the immutable record of ownership – which can have value that goes beyond expression and speculation. Our next explainer on NFTs will explain this core technology.&nbsp;&nbsp;



<h3 class="wp-block-heading">Collectability and social expression</h3>



In the NFT art world, collectors buy NFTs to participate in the creative expression of the art. This reason is most explicitly demonstrated by the popularity of profile picture (PFP) NFTs.



Many social media platforms including Reddit and Twitter already support the use of NFT images as profile pictures. One may choose to buy or mint an NFT to show off a cartoon character or any art that matches their style. This integration amplifies the artistic expression and even provides a sense of belonging to the online communities of the PFP collection.



<h3 class="wp-block-heading">Investment opportunities</h3>



Some collectors may also consider themselves investors who hope to profit from the art in the near or distant future.&nbsp;



Similar to cryptocurrencies, NFTs are speculative assets. Their market value can go up or down based on the level of demand and supply. One of the most valuable NFTs on the market today — <a href="https://blockworks.co/tag/cryptopunks">CryptoPunks</a> — rose from a value of nothing in June 2017 to a floor price of over 120 ETH (during its peak in October 2021).



There is a point however, where some consider investing or “flipping” to be an exploitation of artistic expression. Just as an NFT price tag amplifies an artist’s reach, a falling price can poison public perception. The line between support and exploitation is blurry and almost impossible to spot at the moment.&nbsp;&nbsp;



<h3 class="wp-block-heading">Functionality beyond art</h3>



But just as all authentication of ownership (such as a house deed) isn’t a means of creative expression, not all NFTs are connected to art. This technology can take form in an endless list of use cases ranging from proof of attendance, exclusive access, reputation, brand marketing and more. Our next article will examine these in greater detail.&nbsp;&nbsp;&nbsp;&nbsp;



Some will argue that you should only buy NFTs if the digital asset provides a function worth the price tag, expresses your values and taste or is a speculative bet you are willing to lose. Regardless of reasons, all NFT purchasers should be aware of the risks associated with investing in NFTs.



<h2 class="wp-block-heading">Step-by-step guide to buying an NFT</h2>



To buy an NFT, you will first need to set up a self-custodial wallet, choose an NFT marketplace and place a collection bid or outright purchase an NFT from a listing. While some accept credit cards, the purchase will most often need to be with cryptocurrency. Here’s the step by step breakdown:



<h3 class="wp-block-heading">Step 1: Setting up a wallet</h3>



Buying NFTs requires that you set up a self-custodial wallet for storing assets and trading on marketplaces. The MetaMask wallet is one of the most popular options because it supports the Ethereum network and other EVM-compatible networks such as Polygon, Avalanche and BNB Chain where you can also trade NFTs.



If you want to hold and trade NFTs on the Solana network, you&#8217;ll need to install the Phantom wallet as it offers a user-friendly interface and other advanced features. Other networks such as Tezos and Cardano also have specific wallet options.



This guide on how to buy an NFT will focus on setting up a MetaMask wallet. The process is as simple as going to the<a href="https://metamask.io/download/"> official MetaMask website</a> using your preferred browser, preferably Google Chrome, Firefox or Brave.&nbsp;



<ul class="wp-block-list">
<li>Click download and follow the prompts to install the MetaMask extension on your browser.&nbsp;</li>



<li>Click on Get Started to agree to the wallet terms and initiate the wallet creation.</li>



<li>Select Create a New Wallet and write down the provided 12-word seed phrase on a piece of paper to store it securely.</li>



<li>Confirm your seed phrase.</li>



<li>Set a wallet password and complete the installation process.</li>



<li>Once confirmed, you can find your wallet address by opening MetaMask and clicking where it says Account to copy your wallet address.</li>
</ul>



You can use the wallet address to transfer some ETH from your crypto exchange account to MetaMask. Alternatively, you can use the Buy ETH option on MetaMask to top up your wallet using a credit or debit card.&nbsp;



The process to set up a Phantom wallet for Solana may be slightly different regarding user flow. However, they&#8217;re essentially the same and can be completed in a few minutes. MetaMask and Phantom also offer Android and iOS apps that deliver the same user experience.



A web-based or mobile wallet is ideal for a seamless experience, especially if you&#8217;re going to trade often. However, the best form of security for NFTs is an offline or cold wallet (more on this in Step 5).



Step 2: Choosing an NFT marketplace



After funding your wallet, the next step is to choose an NFT marketplace that lists the particular artwork or collection you want to purchase. The <a href="https://blockworks.co/news/your-guide-to-nft-platforms">best NFT marketplaces</a> list a wide variety of items from top-tier collections. You will want to ensure there is sufficient trading volume to process your order within the shortest possible time.&nbsp;



<figure class="wp-block-table"><table><tbody><tr><td>Marketplaces</td><td>NFT categories&nbsp;</td><td>Supported blockchains</td></tr><tr><td>OpenSea</td><td>Collectibles, gaming, art, music, photography, sports, trading cards, Web3 domain names</td><td>Ethereum, Solana, Polygon, Arbitrum, Optimism, Klatyn</td></tr><tr><td>Blur</td><td>Collectibles only</td><td>Ethereum</td></tr><tr><td>Magic Eden</td><td>Collectibles, gaming, art</td><td>Solana, Ethereum</td></tr><tr><td>Rarible&nbsp;</td><td>Art, collectibles, gaming, virtual worlds</td><td>Ethereum, Solana, Tezos, Polygon, ImmutableX, Flow</td></tr><tr><td>Nifty Gateway&nbsp;</td><td>Art, collectibles, music, social, style, gaming</td><td>Ethereum</td></tr></tbody></table></figure>



When connecting your wallet, some marketplaces may require creating an account using an email and password. The onboarding process is typically straightforward, allowing you to complete it in just a few minutes.&nbsp;



<h4 class="wp-block-heading">Marketplace security</h4>



It&#8217;s crucial to recognize the security risks that come with keeping your NFTs connected to an exchange or marketplace. By storing your NFTs on an exchange, you expose them to potential hacks, insider threats, and even exchange outages, which could hinder your ability to access or transfer your assets.&nbsp;



To counter these risks, some advise transferring your valuable NFTs to a secure personal wallet, preferably a hardware wallet, for safekeeping. This approach allows you to retain full control over your assets while minimizing potential security threats associated with storing them on a marketplace.



<h3 class="wp-block-heading">Step 3: Finding your NFT</h3>



Investors consider many factors when determining the best NFT to buy. For an NFT art collector, the decision would majorly depend on the art&#8217;s appeal and potential resale value.



In terms of potential resale value, an excellent way to evaluate this is to review the artist&#8217;s pedigree and followership. If they&#8217;ve created a lot of art pieces that have been resold at higher prices, your items will also likely be worth more.



On the other hand, investors buying an item(s) within a collection that perhaps has 10,000 NFTs will consider the properties of each asset and their rarity rank. This information is usually available on the market listing for each NFT. You can also use the popular<a href="https://rarity.tools/"> NFT rarity tool</a> to evaluate NFTs independently. Items with a higher rarity rank (closer to 1) are more valuable and desirable.



The final and perhaps most crucial factor to consider when choosing an NFT is its community. You may find it helpful to join Discord communities or review the number of NFT holders regularly promoting the collection by at least using it as a PFP. If the community is helpful, has an active community manager, and members willingly contribute to the project&#8217;s growth, then the NFT item may be worth the purchase.&nbsp;



<h3 class="wp-block-heading">Step 4: Bidding&nbsp;</h3>



While some NFTs are available for instant purchase, you may need to bid in auctions to access other items. The most common type of auction is English style, where you bid against other investors for a listed item, and the highest bidder wins. Dutch style is slightly different, as the NFT creator defines a higher price, which declines until someone places an order for the item.



If you choose to participate in an NFT auction, consider if the artist has a record for inflating art prices through artificial bids. You can review previous sale history to identify such patterns or discern if previously sold items had grown in market value over time.



<h3 class="wp-block-heading">Step 5: Secure storage</h3>



Browser-based and mobile wallets provide the needed flexibility to connect with and transact on the NFT marketplace. They’re also mainly free and support a range of networks. However, many argue that the best form of security for your NFT assets is a hardware wallet. These devices store your private keys offline, removing the majority of attack vectors from hackers.&nbsp;



With a hardware wallet such as the Ledger or Trezor, users mainly use the device to sign and verify transactions. Investors typically transfer their NFTs to the address on their hardware wallet and only move to a hot wallet when they need to list assets for sale. Some leading NFT marketplaces such as OpenSea and Magic Eden already support hardware wallets, making it the best choice for investors with significant NFT holdings in their portfolios.



<h2 class="wp-block-heading">Frequently asked questions</h2>



<h3 class="wp-block-heading">Where is the best place to buy an NFT?&nbsp;</h3>



Popular NFT marketplaces OpenSea and Raible are some of the best places to buy an NFT because they support a wide range of assets across different networks. Meanwhile, other competitors such as Magic Eden and Blur offer unique advantages that see them in the top rankings of the best NFT marketplaces.



<h3 class="wp-block-heading">How much does an NFT cost?</h3>



An NFT can cost anywhere from $10 to several million dollars. The cost depends on factors such as the collection&#8217;s popularity, the issuing artist or company and historical background. Certain NFTs also provide access to dividends or future item releases, further increasing their market value.



<h3 class="wp-block-heading">Is it easy to sell an NFT?</h3>



It is easy to sell an NFT if there is sufficient liquidity for the collection. However, this is not always the case as most NFT collections have low liquidity and often require investors to sell below the market floor price if they want an instant exit.



Experienced investors know <a href="https://blockworks.co/news/how-to-sell-nft">how to sell an NFT</a>, and they are willing to wait until they have a reasonable price and liquidity. These could take several weeks to months, meaning NFTs are not as easy to sell as cryptocurrencies.



<h3 class="wp-block-heading">How to evaluate an NFT</h3>



Unlike cryptocurrencies where assets have a fixed market value, investors evaluate NFTs based on rarity and price history. Reading more exhaustive<a href="https://blockworks.co/the-investors-guide-to-nfts/"> investor guides to NFTs</a> can provide you with knowledge on how to avoid overpricing or underpricing your NFTs.



<h2 class="wp-block-heading">Common advice before NFT buying</h2>



<ol class="wp-block-list">
<li>Know what you want</li>
</ol>



It is easy to get overwhelmed by the thousands of NFT collections available. For this reason, it is best to define precisely the kind of artwork or NFT genre that appeals to you. Doing so prevents you from spending money on just anything you find and increases your chances of making a purchase that pays off in the long run.



<ol class="wp-block-list" start="2">
<li>Compare fees and auction types</li>
</ol>



Most NFT marketplaces charge a fee for every purchase. OpenSea has a fixed 2.5% fee while Magic Eden charges a slightly lower 2%. Blur was the first to have 0 fees. When it launched its marketplace, it made royalties optional but now enforce a minimum 0.5% royalty.&nbsp;



SuperRare has a fixed 15% seller fee while Rarible charges 2.5% from the buyer and seller, respectively. It is advisable to spend some time comparing fees for similar NFTs on at least two platforms and then settle for the cheaper option.



Another thing to pay attention to is the auction style used on the NFT trading platform. Although it is possible to make instant NFT purchases for assets listed as such, some require participating in timed auctions. Others use the more sophisticated Dutch auction style, which considers all investor bids to determine a ceiling price that subsequently declines as investors purchase the auctioned assets. Endeavor to understand how each action type works on your chosen NFT platform before placing an order.



<ol class="wp-block-list" start="3">
<li>Prioritize cold storage</li>
</ol>



Hackers often target NFT investors and have enjoyed remarkable success since a significant chunk of investors only use browser-based or online Web3 wallets. It is advisable to set up a secure cold storage solution for NFTs. This way, assets are stored securely offline and out of the reach of hackers.&nbsp;



A cold storage option is optional but it is especially needed if you plan to invest significant amounts in building your NFT portfolio. Once you have your cold storage solution sorted, you&#8217;re ready to learn how to buy NFTs.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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<ul class="wp-block-list">
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</ul>

investing

How to Buy an NFT and the Core Reasons Why

NFT marketplace Blur.io launched a new peer-to-peer NFT lending platform, cleverly called Blend, on May 1.



Within 24 hours, it facilitated over 500 loans worth over a total of 5,700 ETH. To put that in perspective, industry leader NFTfi’s daily loan volume was 328 ETH. Within just 3 hours of the launch, the platform’s trading volume doubled from 5,175.99 ETH to 11,010.77 ETH.&nbsp;



The question on everyone’s mind: How does NFT lending work, and is this sustainable?



Key takeaways



<ul class="wp-block-list">
<li>NFT lending is a way for NFT holders to borrow money using their non-fungible assets as collateral.</li>



<li>This financing mechanism promises creators and owners new monetization opportunities.</li>



<li>Market volatility and collateral pricing challenges have historically made it difficult for borrowers to get favorable terms.</li>



<li>The latest perpetual peer-to-peer NFT lending model is an attempt to make the lending market more competitive for borrowers without exposing lenders to too much risk.&nbsp;</li>



<li>Concerns of increased financialization in an already hyper speculative market have many worried that the market will not be able to sustain a rush of borrower demand.</li>
</ul>



Read more: <a href="https://blockworks.co/news/blur-nft-lending">Peer-to-peer NFT Lending Is the Way to Go, Blur Says in Protocol Launch</a>



<h2 class="wp-block-heading">How NFT loan platforms work</h2>



Prior to the <a href="https://blockworks.co/news/blur-nft-lending">launch of Blend</a>, the majority of <a href="https://dune.com/impossiblefinance/nft-lending-aggregated-dash">cumulative loans</a> borrowed from NFT lending platforms came from 2 models: peer-to-peer lending (NFTfi) and peer-to-pool lending (BendDAO).



There is an endless list of model variations, but they all work to balance the needs of lenders and borrowers in a way that increases economic activity and liquidity in the NFT market. This mission is particularly difficult with NFT-backed loans because of the inherent non-fungibility of the NFT collateral. As a result, loan terms tend to impose higher interest rates on the borrower and stricter collateral health requirements.&nbsp;



It is a classic chicken or egg conundrum – where liquid markets are needed to support NFT lending and markets need financing to increase liquidity.&nbsp;&nbsp;&nbsp;&nbsp;



For the purpose of this explainer, we will compare these top models to the latest rivals of perpetual peer-to-peer (Blend) and three actors (Astaria).



<h2 class="wp-block-heading">Peer-to-peer&nbsp;</h2>



A peer-to-peer NFT lending model is a financial system that enables direct lending and borrowing of cryptocurrencies using unique, indivisible digital assets (NFTs) as collateral. As the unique quality traits and value proposition of an NFT is by definition indivisible, its appraisal can’t be reduced by the sum of its parts. Peer-to-peer NFT lending models like NFTfi are built on this assumption. They need lenders to individually appraise the value of NFT collateral when offering a loan.&nbsp;



The borrower and lender then enter negotiation to find the fairest possible terms. This process is inefficient compared to the automation of decentralized lending platforms like Aave – where price oracles are able to reliably measure collateral value and enforce LTV requirements. These user experience expectations have made it difficult for NFT lending platforms to acquire the same level of adoption. Here is a step-by-step guide to how it works with <a href="https://nftfi.com/how-it-works/">NFTfi</a>:



<h3 class="wp-block-heading">How NFTfi lending works&nbsp;</h3>



<ol class="wp-block-list">
<li>Borrowers connect their wallets to the platform and list their NFT as collateral, setting their desired loan terms such as loan amount, duration and interest rate.</li>



<li>Lenders browse through NFT collections and propose term offers based on their appraisal of the NFT&#8217;s value.</li>



<li>Borrowers can review and accept an offer for wETH or a stablecoin transferred from the lender&#8217;s wallet.</li>



<li>The NFT is then automatically transferred to a smart contract, which holds the asset for the duration of the loan.</li>
</ol>



NFTfi generates revenue by charging lenders a 5% fee on the interest earned once the loan is paid back. If a borrower fails to repay the loan, the lender can initiate foreclosure. The platform then liquidates the NFT collateral from the smart contract and burns the promissory note, allowing the borrower to keep the loan amount.



<h3 class="wp-block-heading">Pros and Cons</h3>



<figure class="wp-block-table"><table><tbody><tr><td>Pros</td><td>Cons</td></tr><tr><td>&#8211; Both parties can renegotiate loan terms if they mutually agree. &#8211; There are no automatic liquidations before the loan expiration date, offering some stability to borrowers. </td><td>&#8211; Interest rates are typically higher due to the lack of liquidation if the floor price of the NFT drops below the loan amount. &#8211; Lower LTV ratios can make the loan terms less attractive for borrowers. </td></tr></tbody></table></figure>



<h2 class="wp-block-heading">Perpetual peer-to-peer&nbsp;</h2>



The perpetual peer-to-peer NFT model is a lending system that facilitates direct loans between lenders and borrowers without set expiration dates. The model introduced by <a href="https://blur.io/">Blur</a> does not use price oracles to enforce liquidations like the peer-to-pool model. Instead it lets the lender exercise the right to sell the loan in a dutch auction or trigger liquidation when they feel their principal is at risk. The protocol also maintains the borrower’s right to repay the loan and interest at any time.&nbsp;&nbsp;&nbsp;&nbsp;



The philosophy behind this model maintains the assumption that loan terms of NFTs need to be set individually. A key difference with the peer-to-peer model though, is that lenders make offers on an NFT collection basis instead of an individual case-by-case basis.



<h3 class="wp-block-heading">How Blur Blend Lending works</h3>



<h4 class="wp-block-heading">Steps for borrower</h4>



For borrowers in the perpetual peer-to-peer NFT lending model, the process begins with choosing between two options: &#8220;Buy now, pay later&#8221; to purchase an NFT, or borrowing ETH directly from Blend using an NFT as collateral.



<ol class="wp-block-list">
<li>Borrowers connect and fund their wallets, then select the NFT collection and list of items they want to purchase, or the NFT to use as collateral for borrowing ETH.</li>



<li>The protocol aggregates loan offers by price and interest rate, allowing borrowers to review their options.</li>



<li>They can then select the price they want to pay now for a selected NFT and an interest rate that suits them. Or they submit an NFT and request a loan amount and interest rate through their inventory page.</li>



<li>The loan doesn&#8217;t have an expiration date; borrowers can pay it off at any time, and lenders can request payment at any time.</li>



<li>If a lender requests payment, the Dutch auction style refinancing process begins.</li>
</ol>



<h4 class="wp-block-heading">Dutch auction style refinancing and liquidation</h4>



Dutch auction style refinancing involves the loan being automatically sent to a Dutch auction if the lender requests payment. In this competitive process, the auction starts at a 0% interest rate and gradually increases until a buyer accepts the offer, with the interest rate climbing up to a maximum APR of 1,000%. If a buyer picks up the loan, the borrower can retain the NFT at the new interest rate, as long as both parties are satisfied. However, if no buyer is found after 6 hours, the auction closes, and the borrower has 24 hours to pay back the loan. Failure to repay the loan within this period results in liquidating the NFT used as collateral.



<h4 class="wp-block-heading">Loan repayment options:</h4>



When it comes to loan repayment options, borrowers have two main choices. They can either sell the borrowed NFT on the platform to automatically pay back the loan plus interest, or they can choose to pay off the loan in its entirety and keep the NFT. In either case, the borrower fulfills their repayment obligations, and the loan is considered closed.



<h4 class="wp-block-heading">Steps for lender</h4>



<ol class="wp-block-list">
<li>The process starts with connecting the lender’s wallets and funding them with the necessary assets.</li>



<li>The lender then chooses the maximum amount they&#8217;re willing to lend using a single NFT within a specific collection as collateral. This decision will impact the lender&#8217;s Blur Points, a user loyalty rewards system.</li>



<li>Lenders then set their desired annual percentage yield (APY) for the loan, keeping in mind that lower interest rates may result in more rewards.&nbsp;</li>



<li>Once their offers are set, they wait for borrowers to review and accept the loan terms.&nbsp;</li>



<li>After a borrower accepts a loan, the lender can close it at any time and claim the interest accrued.</li>



<li>If the lender requests repayment, the borrower has 30 hours to pay back the loan. During this period, the Dutch auction style refinancing process may take place to help the borrower find new loan terms, as previously explained.</li>
</ol>



This system of no expiration dates and collection specific loan offerings have so far resulted in a more efficient market. But to get a deeper understanding into its ability to gain substantial long term market share keep an eye out for our outlook on the model.&nbsp;



<h3 class="wp-block-heading">Pros and Cons</h3>



<figure class="wp-block-table"><table><tbody><tr><td>Pros</td><td>Cons</td></tr><tr><td>&#8211; Flexibility for borrowers and lenders due to the absence of loan expiration dates. &#8211; Dutch auction refinancing can help borrowers find new loan terms. </td><td>&#8211; Higher risk for lenders since they need to monitor the value of NFTs actively. &#8211; The process can be more complex than traditional peer-to-peer NFT lending. </td></tr></tbody></table></figure>



<h2 class="wp-block-heading">Peer-to-pool&nbsp;</h2>



The peer-to-pool NFT lending model enables borrowers to directly obtain loans from a protocol by using their NFTs as collateral. With platforms like <a href="https://www.benddao.xyz/en/">BendDao</a>, anyone can borrow ETH from a pool of liquidity providers. Borrowers can access up to 40% of the floor value of their NFT collateral.&nbsp;



They can also use these loans to buy NFTs at a fraction of the cost and pay later. First, borrowers use Aave flash loans to acquire the NFT. Next, they leverage the obtained NFT as collateral to secure an instant NFT-backed loan. This loan is then used to repay the initial flash loan.



This model is a departure from the philosophy of peer-to-peer lending platforms. Like Blend, these loans don’t have an expiration date. But inorder to incentivize more liquidity providers, the protocol aims to make the process as passive as possible. Here&#8217;s how it works with BendDao.&nbsp;&nbsp;



<h3 class="wp-block-heading">How BendDao lending works</h3>



<ol class="wp-block-list">
<li>Borrowers begin the process by connecting their wallets and selecting an NFT to use as collateral.</li>



<li>The protocol automatically calculates the loan amount a borrower can obtain by using price oracles to determine the NFT&#8217;s floor price.&nbsp;</li>



<li>An algorithm calculates the interest rate based on available liquidity. It increases the rate when liquidity is low to attract more lenders.</li>



<li>The protocol also sets a health factor, determining the conditions under which the NFT collateral may be liquidated before the loan&#8217;s duration ends.</li>
</ol>



The process for lenders is intended to be straightforward and passive. They can deposit and withdraw funds from the liquidity pool at any time. No lockups are required. Yield will fluctuate with the demand for lending.&nbsp;&nbsp;



<h3 class="wp-block-heading">Pros and Cons</h3>



<figure class="wp-block-table"><table><tbody><tr><td>Pros</td><td>Cons</td></tr><tr><td>&#8211; Provides a more streamlined borrowing experience with automatically calculated interest rates and loan amounts. &#8211; No repayment deadline offers flexibility for borrowers. </td><td>&#8211; Risk of collateral liquidation if the health factor conditions are met. &#8211; May not be suitable for NFTs with fluctuating floor prices, as it could lead to premature liquidations. </td></tr></tbody></table></figure>



<h2 class="wp-block-heading">Three-actor model</h2>



The three-actor model is a hybrid alternative to peer-to-peer and peer-to-pool NFT lending, incorporating a third party, known as a strategist, to facilitate loan transactions between borrowers and lenders. <a href="https://astaria.xyz/">Astaria</a> was the first platform to implement this model, which simplifies the term agreement process.



<h3 class="wp-block-heading">How Astaria lending works&nbsp;</h3>



<ol class="wp-block-list">
<li>Borrowers connect their wallets and choose NFTs to use as collateral.</li>



<li>Strategists, acting as third parties, create public vaults designed to attract liquidity, similar to lending pools. However, unlike lending pools that use universal loan terms for every NFT, strategists customize the terms for each collateral.</li>



<li>Liquidity providers search for a vault offering terms that align with their investment strategy.</li>



<li>When borrowers list their collateral, the strategist employs a set of oracles to automatically appraise the loan and match it to a public vault with sufficient liquidity.</li>



<li>Borrowers then select the loan amount, APR, and duration available in the chosen vault.</li>



<li>Finally, borrowers review and approve the loan, executing the transaction.</li>
</ol>



<h3 class="wp-block-heading">Pros and Cons</h3>



<figure class="wp-block-table"><table><tbody><tr><td>Pros</td><td>Cons</td></tr><tr><td>&#8211; Instant liquidity without back-and-forth negotiations with lenders.Option to refinance when better terms become available. &#8211; Liquidations only occur after the loan expiration date if the borrower fails to repay the loan. &#8211; Liquidity providers can evaluate the risk and return of different vaults, allowing for greater choice.</td><td>&#8211; The strategist&#8217;s involvement adds an extra layer to the loan process. &#8211; Success hinges on the strategist&#8217;s expertise and efficiency. &#8211; As a newer model, it may face challenges gaining widespread use. </td></tr></tbody></table></figure>



<h2 class="wp-block-heading">NFT lending sustainability concerns</h2>



The power of NFT loans are in the eye of the beholder. Like any financing mechanism, it can be used to generate capital and economic activity or to leverage speculative investment.&nbsp;



At a time when the <a href="https://blockworks.co/news/nft-investing-guide">NFT investing narrative</a> is driven by a trader-first ethos, there is a concern that lower rates will spark a tinderbox of degen flippers starving for momentum. But as with all concerns wrapped in fear and uncertainty, context is needed.&nbsp;



The NFT market is inherently illiquid and difficult to quantify, so the mechanics of cheap debt play out differently from its more fungible counterpart. It is hard to predict the impact it can have on demand.&nbsp;



Many prominent creators argue that the NFT industry needs a divorce from price speculation incentives. Instead of optimizing projects for a dwindling audience, they need to build for new use cases in media, physical goods and experiences, gaming and so on. They believe these innovations will attract the audience needed to kick off a new cycle. If this is the case, the NFT market may not need this type of leveraged investing to reach its market fit.&nbsp;



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<ul class="wp-block-list">
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Blur

How Does NFT Lending Really Work? A Deep Dive

In February, the David of NFT marketplaces, Blur.io, overtook industry giant OpenSea in trading volume. But the answer to who is David and who is Goliath changes depending on who you ask — especially as both platforms force creators to blacklist their opponent in return for royalties.&nbsp;&nbsp;



So how do you go about selling NFTs in this turbulent market? Do you chase the trading volume on Blur or do you look for alternative markets? A lot has changed since the days of six-figure rock pictures and million-dollar metaverse land.&nbsp;



Our last explainer covered the shifting <a href="https://blockworks.co/news/nft-investing-guide">NFT investing</a> narratives behind this market. In this guide, we will explain the basics of minting, marketing and selling NFT in light of these changes.



<h2 class="wp-block-heading">How to sell an NFT</h2>



The process of minting, listing and selling an NFT is relatively straightforward. All you need is a Web3 wallet and enough cryptocurrency to cover network fees on the transaction. We will cover these basics in more detail, but first, it is important to evaluate the fundamental qualities that make your asset valuable. This will inform where you choose to list it and your marketing strategy.&nbsp;



<h3 class="wp-block-heading">Pricing the NFT asset(s)</h3>



The unique nature of each NFT means that sellers often risk underpricing or overvaluing items. For instance, items with high rarity attributes are usually valued above the quoted floor price (the lowest price for a listed item from the same collection).&nbsp;



Sellers can adequately price their NFT by reviewing the trading history for items with similar rarity attributes. Alternatively,<a href="https://app.upshot.xyz/"> Upshot</a> and<a href="https://dappradar.com/hub/nft-value-estimator"> DappRadar</a> allow investors to appraise NFTs from the most popular collections instantly.&nbsp;



<h3 class="wp-block-heading">Analyzing the asset’s value&nbsp;</h3>



These tools can also be used to formulate a thesis on what the market is valuing and might value in the future. Creators often use that knowledge as a source of inspiration and investors use it in their trading strategy. Our previous article explains the <a href="https://blockworks.co/news/nft-investing-guide">psychology behind NFT trends</a> in greater detail.&nbsp;&nbsp;



Creators and investors trying to sell NFTs outside the popular collections may need to evaluate the asset through a broader thesis instead of previous sales within a collection.



But what’s trending on Upshot may not resonate with your network. The seller needs to consider the thoughts and perspectives of the community of&nbsp; NFT holders or potential holders.&nbsp;



The NFT world is by no means a monolith. There are debates over the purpose of NFTs, the role of <a href="https://blockworks.co/news/nft-royalties-sometimes-they-work-sometimes-they-dont">royalties</a> and even rivalries between collections. So if you want to create or find something that resonates with collectors, you need to dive into the Discords and Telegrams to ask questions and learn.&nbsp;&nbsp;&nbsp;



<a href="https://lunarcrush.com/nfts/">LunarCrush</a> is another great resource for tracking the sentiment around an NFT collection across social media. You can use it to track floor price with metrics like number of posts, engagement, bullish sentiment and bearish sentiment.&nbsp;&nbsp;



<h3 class="wp-block-heading">Choosing an NFT marketplace</h3>



Lately, NFT marketplaces have made a habit of getting creators to blacklist other platforms from listing their NFTs. In other words, this marketplace blacklisting is a way to block the smart contracts of one platform to list the NFTs created on another. This enforcement though is not an easy flip of the switch. Platforms need uptodate information about the smart contracts used by their competitors.&nbsp;&nbsp;



The blacklisting trend started when NFT artist Tyler Hobbs, added X2Y2 marketplace to a blacklist in the smart contract of his QQL collection. He did this in protest to their decision to stop enforcing royalties. ImmutableX, a layer-2 blockchain, then created a <a href="https://blockworks.co/immutable-alex-connolly-on-protecting-nft-creator-royalties">community-managed whitelist and blacklist</a> that would make broad enforcement easier across the Ethereum NFT ecosystem.&nbsp;



The drama continued as multiple marketplaces like OpenSea responded by requiring creators who want to list and mint their collection on <a href="https://blockworks.co/news/nft-creators-looking-for-royalties-face-an-uphill-battle-galaxy">OpenSea</a> to use a smart contract that blacklists their collection from marketplaces that don’t enforce royalties.&nbsp;



At first this meant that all NFTs created through OpenSea would get blacklisted from appearing on these other marketplaces. This move caused some backlash which prompted OpenSea to make this <a href="https://blockworks.co/news/nft-creators-looking-for-royalties-face-an-uphill-battle-galaxy">blacklist optional</a>. So if creators wanted royalties enforced on OpenSea, they would need to use the smart contract blacklisting other platforms. But if they didn’t want or need royalties enforced, they could opt out.&nbsp;



As a result, marketplaces have grown more fragmented. It used to be that buyers could find listings from a single collection across almost all platforms. But now collections sit divided in pro-royalty and anti-royalty camps.&nbsp;&nbsp;



NFT sellers need to take these blacklisting trends into consideration when choosing an NFT marketplace – especially if you are a creator hoping to get royalties. The camps on the opposing sides of the debate tend to share similar <a href="https://blockworks.co/news/nft-investing-guide">investing metas</a>. In addition to comparing culture differences, you will want to take these factors into consideration:&nbsp;



<h4 class="wp-block-heading">Supported networks</h4>



The chosen NFT marketplace needs support enabled for the network on which you hold the assets. The most popular NFT marketplaces support multiple networks, including Ethereum, Solana and Polygon, ensuring you can list and trade assets.&nbsp;



<h4 class="wp-block-heading">Liquidity&nbsp;</h4>



Review the platform’s historical trading volume for the particular collection you wish to sell. This is often an easy way to determine the duration before you get an offer for your listing and potentially close a sale. Some platforms also offer an “Instant Sell” option for specific collections, making the sale process straightforward.



Creators planning a launchpad sale on an NFT marketplace find it helpful to review the performance of previous mints. Such insights provide a crucial indicator of how your collection will fare post-listing.&nbsp;



<h4 class="wp-block-heading">Trading fees&nbsp;</h4>



NFT trading platforms typically charge a fee for each sale. Some charge a specific amount from buyers and sellers, while some only charge fees on the buyer side. Experienced sellers compare trading fees across platforms before choosing which to list their assets.



Choosing the right NFT marketplace is essential because users cannot list the same asset on multiple platforms. Once you select a platform, the next step is to set up your profile and initiate the listing process.



Read more: <a href="https://blockworks.co/news/your-guide-to-nft-platforms">The Top 8 NFT Marketplaces&nbsp;</a>



<h3 class="wp-block-heading">Listing your NFT</h3>



The next step after choosing a marketplace is to list your NFT. Connect your Web3 wallet to the NFT platform and head to their listing page to see the available options. A seller can usually choose between a fixed-price sale or <a href="https://blockworks.co/news/your-guide-to-nft-platforms">different auctions</a>.&nbsp;



With a fixed-price sale, any buyer can instantly purchase your NFT by paying the listing amount. Auctions offer a different approach where you reserve the option to sell an NFT for the best value price. Timed auctions are the most popular and often used for exclusive NFT releases.



The two main timed auction types include selling to the highest bidder or with a declining price. The latter involves setting a high price that drops at regular intervals until someone places a bid. This is different from the other method, where the highest bidder wins.



During the NFT listing process, sellers define prices and the accepted currency if the platform supports multiple currencies or even fiat payments. Unless the platform has a manual review process for new listings, the marketplace can create a new NFT listing within a few minutes. For manually vetted platforms, the review could take a few days or weeks.



<h3 class="wp-block-heading">Promoting your listing</h3>



Following a successful listing, the next logical step is to attract potential buyers to the listing page. Some NFT creators begin promoting a mint event or new listing several weeks ahead to build anticipation. Creators can often amplify these promotions through partnerships with influencers and strategic partners.&nbsp;



For instance, creators releasing new NFT art collectibles may partner with a marketplace for a launchpad sale instead of a direct release. A launchpad sale usually provides a better outcome, allowing instant exposure to a broad audience.&nbsp;



For individuals, NFT platforms typically provide a range of options for users to share their listings across social media platforms. Successful investors find it helpful to promote their listing on Telegram and Discord communities with potential buyers. Joining and being active in these communities also increases your chances of closing a sale within the shortest possible time.



<h3 class="wp-block-heading">Closing a sale</h3>



NFT marketplaces notify users once there&#8217;s an offer or sale on a listing. You can find all open offers from the profile page or any tab provided on the platform for managing current listings.&nbsp;



For items not listed for &#8220;Instant Sale,&#8221; users reserve the right to choose whether or not to accept an offer. It is vital to carefully review an offer before hitting the accept button, especially in rare cases where buyers can pay in multiple currencies. Certain malicious buyers place spoofing orders, such as offering 0.5 USDC for an asset listed at perhaps 0.5 ETH. NFT sellers can avoid such errors by limiting supported currencies or exercising extra caution before approving any offer.



Once you accept an offer, the marketplace completes the exchange and transfers the purchase amount (minus fees) to your connected wallet address. Timed auctions use a slightly different format where sales automatically settle at the expiration of the period. In either case, a successful sale marks the final step where you receive payment.



<h2 class="wp-block-heading">The art and science of selling NFTs</h2>



Learning how to sell an NFT is essential for creators and investors seeking exposure to the emerging niche. The process is slightly more exhaustive for creators as it involves advanced marketing and strategic planning to ensure a successful sale.&nbsp;



For individual investors, selling an NFT is more straightforward. It can be completed within a few minutes or days, depending on factors such as the listing price, chosen sale method and marketplace features. The best possible outcome is to complete a sale at a price that meets an investor&#8217;s objectives and supports the continued growth of the NFT industry.



<h2 class="wp-block-heading">Frequently Asked Questions</h2>



<h3 class="wp-block-heading">Are NFTs easy to sell?</h3>



NFTs are easy to sell if you already have a large audience, sufficient capital and trade the most in-demand collections. For creators, other factors determining whether NFTs are easy to sell include the artwork’ quality and the marketing strategies.&nbsp;



Noteworthily, NFTs can also be difficult to sell. Unlike cryptocurrencies that boast a reasonably liquid market to trade assets instantly, users typically have to wait hours to sell an NFT on the secondary market. Aside from new drops that typically sell off in minutes using the right strategies, their non-fungible nature can make NFTs challenging to sell on the secondary market.&nbsp;



Additionally, there are just about<a href="https://www.statista.com/statistics/1266322/nft-user-number/"> two million NFT holders</a> globally. This means there is a limited pool of buyers to tap into and this creates stiff competition between existing NFT creators and investors.



<h3 class="wp-block-heading">How much does it cost to sell an NFT?</h3>



NFT sellers may pay a fee between 1%-10% of the sale value if they list their asset on a marketplace. For creators, the cost of selling an NFT may include marketing expenses and the costs associated with organizing a launchpad sale or a direct issuance through their platform.



<h3 class="wp-block-heading">Can I sell my NFT for cash?</h3>



The standard for most NFT marketplaces is to allow users to sell assets in exchange for cryptocurrencies. However, a few platforms like Nifty Gateway and Makers Place enable users to buy and sell NFTs for cash.&nbsp;



Many creators also integrate various payment solutions to accept cash payments during their NFT mint/drop. This option opens the sale to more participants and protects against cryptocurrency volatility.



<h3 class="wp-block-heading">What type of NFT sells the most?</h3>



Art is the best-selling form of NFTs. Over 70% of the<a href="https://metav.rs/blog/most-expensive-nfts/"> most expensive NFTs</a> sold are artwork, with the top pick being The Pak&#8217;s &#8220;Merge&#8221; collection which raised $91.8 million. Another hot-selling niche is art collectibles, with leading collections such as Bored Ape Yacht Club (BAYC) and CryptoPunks topping the charts for the most actively traded NFTs, with<a href="https://www.nansen.ai/guides/nft-statistics-2022"> over $2 billion</a> in cumulative volume since inception.



<h3 class="wp-block-heading">What happens if your NFT doesn’t sell?</h3>



If your NFT doesn&#8217;t sell, you risk losing the money invested in designing the collection or purchasing it from a previous holder. However, there are no fees associated with a failed launch or not finding a buyer for your NFT. Ideally, you can restrategize and explore new ways to ensure a more favorable outcome.



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How to Sell an NFT — The Investor’s Guide

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The Best (and Worst) Crypto Loan Providers of 2023

What Is Proof-of-work (PoW)? All You Need to Know

Proof-of-stake is a type of blockchain consensus mechanism that evaluates the crypto stake of participating nodes when selecting one for block validation.



But first, why do blockchains need proof of anything when validating transactions?&nbsp;



In a sea of anonymous participants, the network needs a way to coordinate all well-intentioned players. The &#8220;proof&#8221; is evidence that a participant met the necessary conditions to validate a block of transactions and are acting in good faith. Our latest guide on <a href="https://blockworks.co/news/consensus-mechanisms-guide">consensus mechanisms</a> explains how these coordination games can differ.



Proof-of-stake is like a coordination game where players compete by proving they are committed to playing it forever.&nbsp;As long as a protocol&#8217;s token has some form of value outside of the network, staking it with a validator is a measure of commitment.



The popular proof-of-stake consensus mechanism is best known for its energy efficiency because it replaced the energy requirement of <a href="https://blockworks.co/news/what-is-proof-of-work">proof-of-work</a> with token collateral. Peercoin was the first to use the alternative model in 2012. And now, over 80 different cryptocurrencies are using the consensus mechanism.



Read more: <a href="https://blockworks.co/news/what-is-proof-of-work">What is Proof-of-Work?</a>



Proof-of-stake has recently shared a bulk of the spotlight as Ethereum transitioned from proof-of-work (PoW) to PoS in September 2022. But statements and actions from SEC Chair Gary Gensler have many concerned that PoS blockchains are vulnerable to security laws enforcement.&nbsp;



And as many familiar with consensus mechanism wars know, there are more concerns and trade-offs that critics argue limit its capacity to provide security and censorship resistance at scale.



Are these critiques honest, or are they primarily motivated by profit-driven incentives? This article will dig into these concerns and evaluate the advantages the PoS system offers popular blockchains.&nbsp;&nbsp;



<h2 class="wp-block-heading">Why was it invented?</h2>



Bitcoin&#8217;s creation introduced the world to the immense benefits internet-based communities could unlock through a distributed ledger. However, its limitations with scalability and infrastructure gradually came to light as increasing numbers of users adopted the network. Transactions were slow and expensive during peak demands, while concerns around its environmental impact emerged as specialized computers worldwide began focusing their power on mining activities.



Someone in the BitcoinTalk forum first introduced proof-of-stake as a possible solution to the computing resources problem. Sunny King, an anonymous author, and Scott Nadal later implemented it in their published whitepaper for Peercoin.&nbsp;&nbsp;



<h2 class="wp-block-heading">How does proof-of-stake work?</h2>



The proof-of-stake consensus model enables coin holders on the network to lock up or commit their assets in exchange for the power to verify and add new transactions to the blockchain. These stakers (called validators) usually meet a specified threshold of locked coins and receive new coins as a reward for their service to the network.



The primary principle behind the PoS model is that individuals with the highest stake in the system have a natural incentive to act honestly and maintain the network. Any attempt at dishonesty could lead to substantial losses in the value of their staked assets.



Most PoS chain algorithms use a lottery system that selects block validators. The higher the number of coins the validator has staked, the greater their chance of being chosen to create new blocks and earn associated rewards.&nbsp;&nbsp;



Network participants who cannot afford the costs of running a validator node may use various staking services to participate. For example, Ethereum staking has a lock-up period, so if a user wanted to stake directly, they would lose access to their funds for a time. They can stake with liquid staking platforms such as Lido and Rocket Pool if they want access to their funds before the release date. These platforms are decentralized smart contracts that stake ETH on users&#8217; behalf and provide a staking derivative called stETH in return. Users receive rewards in proportion to their stETH holdings. Market forces can cause these derivatives to depeg from the value of ETH.



Other proof-of-stake blockchains such as Cardano do not have lock-up periods for the delegated stake. So if a user doesn&#8217;t want to run their node, they can delegate their ADA directly to a stake pool without losing custody.



Both approaches entitle stakers to receive a portion of rewards earned by the validator. Moreover, specific implementations, such as delegated proof-of-stake (DPoS), choose validators for new blocks based on the number of coins community members stake to the validator&#8217;s node.&nbsp;



<h2 class="wp-block-heading">How is proof-of-stake different from proof-of-work?</h2>



Proof-of-stake differs from proof-of-work in several ways. The most significant distinction is in terms of energy usage. PoS replaces miners with validators, thus eliminating the need to expend electricity or set up application-specific integrated circuit (ASIC) machines to verify and create new blocks.&nbsp;



PoS chains remove the infinite race that typically forces miners to compute the same transaction while only one wins. This leads to significantly less energy usage, as validator selection is based on the value of staked assets.



The introduction of validators is significant for another reason. The value of the network&#8217;s currency is no longer tied to a real-world asset – energy – as in the case of proof-of-work. Instead, the currency&#8217;s value primarily depends on economic activity on the blockchain network. Validators can increase their dominance and earnings through accumulation, creating inherent demand for the asset.



Another difference between a PoW and PoS chain is that the latter typically allows all coin holders to earn rewards by supporting the network&#8217;s security. PoW, on the other hand, only incentivizes miner participation.&nbsp;



<h2 class="wp-block-heading">Goals of proof-of-stake</h2>



The proof-of-stake consensus mechanism aims to make blockchains faster while reducing the environmental impact of operating these systems. PoS chains can handle more transactions per second despite consuming significantly less energy. However, the model takes a different approach to solving the blockchain trilemma.



The blockchain trilemma is the premise that blockchains can only offer two of three benefits in connection with decentralization, security and scalability. Although PoS chains can scale to handle other mainstream use cases, such as hosting decentralized applications, they are generally considered more centralized than Bitcoin&#8217;s PoW. Both systems also offer a degree of security designed to strengthen as adoption grows.



<h2 class="wp-block-heading">Proof-of-stake security</h2>



Proof-of-stake blockchains inherit security by delegating the role of verifying and confirming transactions to its biggest stakeholders. Having significant economic value locked in means validators must act honestly or lose substantially if the ledger&#8217;s integrity is compromised. Yet, even such a system faces the possibility of the theoretical 51% attack — where a malicious individual or group controls more than half of the network&#8217;s staked assets and can alter the ledger simply to destroy public faith in the network.



PoS chains take other approaches to mitigate against a 51% takeover. For instance, <a href="https://ethereum.org/en/developers/docs/consensus-mechanisms/pos/rewards-and-penalties/">Ethereum implements &#8220;slashing,&#8221;</a> a feature that allows honest validators to vote against such malicious transactions and burn the ETH staked by the dishonest actor. This measure disincentivizes bad actors, who can easily start earning by acting in the network&#8217;s best interests.



Meanwhile, a PoS chain is as secure as the number of validator nodes. The higher the number of validators and distribution of staked assets, the less susceptible the network becomes to a security breach. The requirements for running a validator node vary between different PoS chains and may significantly impact the network&#8217;s decentralization and security.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1920" height="1080" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=1024&amp;h=1024" alt="" class="wp-image-53033" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=1920 1920w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/accessibility-by-network.jpg?w=80 80w" sizes="auto, (max-width: 1920px) 100vw, 1920px" /><figcaption class="wp-element-caption">Source: <a href="https://xangle.io/en/insight/research/6401ac567d042bb664893d6d">Xangle</a></figcaption></figure>



Even though the number of validators on PoS chains tends to scale linearly following the network&#8217;s launch, factors such as the minimum staking limit and hardware requirements may impede growth. Networks with minimal setup demands and substantial economic value achieve greater security and decentralization in the long term.



<h2 class="wp-block-heading">Pros and cons of proof-of-stake in crypto</h2>



Like other consensus mechanisms, proof-of-stake has unique advantages and disadvantages. The benefits account for its wide adoption across the crypto ecosystem, while the weaknesses reveal why established networks such as Bitcoin continue to run on PoW consensus.



<h3 class="wp-block-heading">Pros</h3>



<ul class="wp-block-list">
<li>Energy efficiency: PoS chains are energy efficient because validators are chosen based on staked assets or arbitrary requirements such as reputation and stake duration. Hardware requirements are also relatively accessible compared with running a PoW mining operation.</li>



<li>Fast and cheap transactions: Some proof-of-stake chains offer fast and efficient transactions, which makes them ideal for decentralized applications and other modern blockchain use cases. It is important to note that not all proof-of-stake implementations reduce fees. For example, Ethereum&#8217;s transition to PoS did not make significant changes to the model (maximum extractable value) responsible for transaction cost and speed. As a result, the network is still prone to high fees and congestion.&nbsp;</li>



<li>Flexibility to change and evolve: Validators can easily vote to modify various PoS implementations to adapt to the network&#8217;s needs. However, such modifications are usually challenging to execute on a legacy model such as PoW because of technological limitations.</li>
</ul>



<h3 class="wp-block-heading">Cons</h3>



<ul class="wp-block-list">
<li>Relative infancy: PoS and recent adaptations to the consensus mechanism are very new and thus unproven over extended periods. Fears remain that unique vulnerabilities may emerge as the model sees wider adoption.</li>



<li>Inferior security: The system remains vulnerable since PoS chains tie their value to the underlying currency instead of a real-world asset. PoS networks must make extra efforts to discourage wealthy participants from buying influence. This can increase the protocol&#8217;s complexity and make it more difficult to audit for bad behavior. PoW chains require energy investments which are not correlated with the crypto asset. They are still prone to wealthy centralized forces. However, it is more difficult to manipulate the cost of energy than crypto.&nbsp;</li>



<li>Centralization of power and governance problems: The system also tends to become more centralized as the rich perpetually increase their dominance due to having a high stake in the network. Validators with significant holdings can also have an excessive influence on transaction verification.&nbsp;</li>



<li>Stringent exit rules: To combat the ease at which validators can exit their position, some PoS chains may require locking up staked coins for a minimum amount of time – often with no end. Such arbitrary rules may impose huge losses on validators, as they cannot react to market developments.</li>



<li>Security laws enforcement: The SEC made proof-of-stake services the target of their enforcement when they <a href="https://blockworks.co/news/kraken-settles-sec-crypto-staking-program">charged Kraken for its staking service</a>. Gary Gensler also hinted that the protocols themselves may be a target when he said the group of entrepreneurs and developers behind protocols with locked tokens &#8220;should seek to come into compliance.&#8221; The SEC also listed three PoS tokens — ALGO, OMG and TKN — along with DASH, NGC and IHT, as securities in a <a href="https://blockworks.co/news/sec-names-other-tokens-bittrex-lawsuit">lawsuit against crypto exchange Bittrex</a>. Their argument was more rooted in the evidence of centralizing forces behind each token and the expectation of profit from token holders. Many argue that staking yield usually constitutes an expectation of profit – an essential tenet of the Howey Test.&nbsp;&nbsp;</li>
</ul>



Read more: <a href="https://blockworks.co/news/sec-staking-enforcement-explained">Will The SEC Target Crypto Validators and Protocols Next?</a>



<h2 class="wp-block-heading">Proof-of-stake cryptocurrencies</h2>



Proof-of-stake is most cryptocurrencies&#8217; preferred consensus mechanism, especially blockchains focused on hosting decentralized applications. At the time of writing, six of the top 10 cryptocurrencies implement the native PoS mechanism or a modified version. Here are the top PoS cryptocurrencies:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/tag/ethereum">Ethereum</a>: The second-largest cryptocurrency network, Ethereum migrated to PoS in 2022 as part of broader efforts to scale its ecosystem. The network had initially operated the PoW consensus model until making the switch.</li>



<li><a href="https://blockworks.co/tag/bnb">BNB</a>: Binance-backed BNB Chain implements a modified version of PoS called proof-of-staked-authority (PoSA). The model is considered more centralized but offers greater scalability.</li>



<li><a href="https://blockworks.co/tag/Cardano">Cardano</a>: Launched in 2017, Cardano adopts the native PoS, using its native Ouroboros protocol to determine the next block producer. Although the network&#8217;s speed pales compared to competitors, Cardano is generally considered one of the leading adopters of the PoS model.</li>



<li><a href="https://blockworks.co/tag/solana">Solana</a>: The Solana network uses PoS alongside other novel protocols to deliver extremely cheap and fast transactions. Notably, the network ranks high on the list of PoS cryptocurrencies despite persistent liveness issues.</li>



<li><a href="https://blockworks.co/tag/polkadot">Polkadot</a>: Polkadot is another blockchain project that adopts a modified PoS version. The network utilizes a nominated proof-of-stake (NPoS) protocol which selects validators based on past performance.</li>
</ul>



<h2 class="wp-block-heading">The future of proof-of-stake</h2>



PoS chains offer greater energy efficiency and scalability features that account for its wide adoption with the cryptocurrency system. But if there isn&#8217;t enough validator diversity, the protocol can suffer from censorship, security and slashing risks. These risks, though, are similar to PoW and many other consensus mechanisms.&nbsp;



And while PoS services and tokens have been the target of regulation by enforcement, it doesn&#8217;t mean that policy is settled. There is a strong argument for classifying many of these tokens as commodities – as long as they are properly decentralized and protocol staking risks are minimized.&nbsp;



The advent of the proof-of-stake consensus model has paved the way for blockchains to power multiple use cases previously unimaginable. These capabilities have already played a crucial role in onboarding mainstream audiences to the blockchain and look set to continue doing so for the foreseeable future.



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