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  5. GLXY: I am trying to determine the economic dynamics of bitcoin, specifically mining. [Galaxy Digital Holdings Ltd. ordinary shares]
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Q: I am trying to determine the economic dynamics of bitcoin, specifically mining. Today’s G&M article on bitcoin states that with the halving and its the resultant effect , and the cap of 21 million coins , the rewards for mining will become smaller eventually approaching zero. Am I correct in this ? If miners get no reward then someday they will cease to mine. What would replace this I wonder. Economics 101 would show that a cap on anything skews the economic model and creates opportunities. I know GLXY does much more than mining . Still trying to figure this whole thing out. Thanks. Derek
Asked by Derek on April 22, 2024
5i Research Answer:

Embedded in Bitcoins code is a 'halving' event which takes place roughly every four years. Before the halving last week, miners were earning 6.25 btc per 'block mined', but now after the halving it is 3.125 btc. Four years from now this reduces again to 1.5625 btc. This continues to take place until all 21 million coins have been mined (roughly 100 years from now). 

Once all coins have been mined, bitcoin miners will be solely reliant on transaction fees. As part of miners securing and validating the bitcoin blockchain, they earn both a 'block subsidy' (btc rewards, 3.125 btc) and transaction fees (fees that individuals transacting on the blockchain are required to pay). The more demand for transactions, the higher these fees are. With the event of the halving, there was significant blockspace demand, and this increased fees to much higher than the 3.125 btc subsidy.