A research on blockchain technology was made by University College London and it revealed that bitcoin’s present proof of work (PoW) mining cost is necessary to ensure the network’s trustless and decentralized nature. Tomaso Aste, director of UCL’s Center for Blockchain Technologies, offers a rough estimation of the equilibrium fair cost of bitcoin’s PoW system. The fair cost per block is roughly $10,000 which is less than the current amount that will be earned if you discover a block today.
There has been a long standing debate over bitcoin’s use of mining for transaction verification that many consider the process to be excessively wasteful and an unnecessary process of the system’s structure. However, according to Aste, that amount of money being spent per block can be justified if it maintains a distributed transaction network.
At present, a block reward of 25 BTC will allow miners or distributed members of a mining pool to net more or less $15,600 but with the eventual halving that may occur anytime this July, the subsidy will fall to 12.5 BTC. Will bitcoin mining generate more money than what will be paid for electricity? If power is cheap, the bigger will be the mine and the more bitcoins will be generated. However, according to Aste, very small margins of profit will be left behind if the standard $8,333 in power per block is halved.
In order to ensure profitability in a double –spend attack, it is important for the transactions to be confirmed at least 6 times on the network. Aste has arrived at an estimate for fair cost of proof of work through a double-spend attack with a value of about $1 million as an example. However, it is unrealistic for a double-spend to go unnoticed, the equilibrium fair cost of Bitcoin’s PoW will be equal to the duplicated fraction of the block’s value to be divided by the number of blocks required to settle which in this case is six.
Bitcoin miners are certainly eager to know what will happen with bitcoin halving. Bitcoin prices remain volatile at $600 because participants are taking action in anticipation of the halving.