RIOT Platforms Highlights Vulnerabilities Around BTC Halving

On February 23, Riot Platforms, the publicly-listed Bitcoin mining firm, shared its latest annual report. In this report, they highlighted more than thirteen continued risk factors for its profitability in 2024. While the other factors affecting profitability mostly remained constant.

These factors will impact its operations, including troubles in the broader crypto economy and a decrease in on-chain transaction fees, around the expected bitcoin halving event in April 2024.

The company is specifically highlighting the halving event’s potential to reduce mining rewards as a central concern for its future profitability.

It is prevalent among most of the players in the industry but Riot, being a listed company, cannot hide it from its stakeholders. The likely impact of the listed risk factors are not known but they have to inform their shareholders about all the upcoming vulnerabilities in advance.

Current Status of Bitcoin Mining Reward

Currently, the Bitcoin protocol assigns the BTC reward to those who find the hash, which confirms that it is the main source of income for those who mine crypto.

With the creation of each new block, 6.25 bitcoins are assigned to the miner, who is responsible for managing and validating the creation by finding the correct hash, and a block is mined approximately every ten minutes. In a single day, more than 900 bitcoins are distributed to miners as a reward.

Halving of the Bitcoin Mining Reward

The upcoming Bitcoin halving event, which is scheduled for April 2024, will reduce the reward to 3.125 BTC per block, cutting down the total daily rewards for miners to 450 BTC. This change could significantly impact their profitability.

The crypto mining activity is a competition where a miner who can extract more hashes is favored, as these coins are extracted randomly. The drawback of an increase in mining activity is that it increases energy consumption. This leads to high costs, and in the face of a reduction in revenues, it might be difficult to continue with such costs.

Another source of income for miners is transaction fees, but the amount is much less than 900 BTC per day. For instance, the last blocks have all yielded less than 0.4 BTC in fees, which is much less than the current 6.25 BTC reward, which will now become 6.125 BTC in April.

Conclusion: Miners’ action to Safeguard their Rewards

Bitcoin halving is a certain and predictable event, and miners are taking counteractions to maintain their income. The loss of mining rewards is certain so the only way to protect their returns is by cutting their costs.

Riot platforms have discussed some of the ways to maintain profitability, including the use of energy-efficient machines to reduce energy consumption and that the cost of energy must be paid in fiat currencies so that an increase in the ratio of Bitcoin/ fiat currency can positively impact miners.

Anurag is working as a fundamental writer for The Coin Republic since 2021. He likes to exercise his curious muscles and research deep into a topic. Though he covers various aspects of the crypto industry, he is quite passionate about the Web3, NFTs, Gaming, and Metaverse, and envisions them as the future of the (digital) economy. A reader & writer at heart, he calls himself an “average guitar player” and a fun footballer.