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Bitcoin was designed to be a medium of exchange, like dollars, but it has become over time more like an investment, such as gold. Now, Bitcoin investors and consumers alike face an event that will significantly affect the value of their holdings, drive up Bitcoin’s price, and affect the digital currency’s prospects as a medium of exchange.
Probably this coming weekend, the reward Bitcoin miners earn for validating transactions will be cut in half, to 3.125 Bitcoins per block on the blockchain. The precise timing of this so-called halving event isn’t yet fixed. The event, baked into Bitcoin’s code, occurs every 210,000 blocks, or roughly every four years, The last halving took place May 10, 2020, and cut the reward to 6.25 Bitcoins per block. The upcoming event will be the fourth halving in Bitcoin’s relatively brief history.
The purpose of this automatic reduction is anti-inflationary. The idea is that miners earning a smaller reward will work less diligently to process new transactions, which in turn will help maintain Bitcoin’s value. The diminished reward can especially impact smaller miners as they contemplate slowing their work in the face of rising costs for equipment and energy, observers say. Miners, however, don’t depend solely on mining rewards. They also earn transaction fees.
But consumers and merchants face the problem of renewed volatility in an asset whose appeal has largely been to investors. After the last halving, Bitcoin’s price increased eight-fold, to a peak of $68,982, by Nov. 10, 2021—some 18 months after the halving event. That return, in fact, was muted compared to the 30-times and 93-times returns the 2016 and 2012 events ultimately delivered, respectively.
All this volatility, though, isn’t slowing companies that hope to bring digital currencies into the consumer mainstream. Bitcoin Depot Inc. late Friday said an unnamed outside investor has committed to support some 250 Bitcoin kiosks. In return, the investor will receive an unspecified percentage of the machines’ profits. Bitcoin Depot operates a network of some 7,300 machines that allow users to convert fiat currency to Bitcoin.
The investor involvement, which Bitcoin Depot refers to as its profit-sharing program, launched last year. Investment terms were not immediately available.
The company specializes in placing its machines in high-traffic convenience stores and similar locations, including FastLane, Gas Express, High’s, Majors Management, Stinker Stores, GetGo Café + Market, and Jacksons Food Store. It also offers its BDCheckout app, which allows users to buy cryptocurrency at clients’ stores.
