After the Halving Occurs, Bitcoin’s Hash Rate Could Drop by up to 30%

Alexander Salazar
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After the Halving Occurs, Bitcoin’s Hash Rate Could Drop by up to 30%

The Chinese market already has access to state-of-the-art mining equipment. Since April, the hash rate of the Bitcoin network has reached all-time highs.

The Bitcoin network’s processing speed (hash rate) has reached all-time highs ​​as Bitcoin’s third halving approaches. However, the Chinese market monopolizes the latest-generation equipment.

During a discussion on mining, Alejandro De La Torre, Vice President of the mining pool Poolin, explained what could happen with mining on the Bitcoin network after the next halving, scheduled for May. De la Torre stated that the community expects the hash rate to decrease. In that sense, he agrees with the opinion of several professionals in the industry, who estimate a drop between 13% and 60%.

De la Torre considers that recent market conditions have been attractive for the mining platforms Antminer S19 series ASIC and Whatsminer M30S. The reduction in mining reward on the Bitcoin Cash and Bitcoin SV networks led many miners to migrate to the Bitcoin network, causing the hash rate to reach all-time highs in early April. However, once the halving occurs, this mining equipment could become obsolete for mining on the Bitcoin network, due to low profitability.

The executive noted that there are also rumors that the Chinese market already has access to next-generation miners. Meanwhile, the North American and European markets do not have access to these new devices at a reasonable price.

Awaiting Drop in Bitcoin’s Hash Rate

The vice president of Poolin estimates that S9-generation miners represent 30% of the Bitcoin network’s hash rate. In this regard, the company Blockware Solutions noted that S9 devices represent 38% of the mining power.

According to said figures, if this generation of miners becomes obsolete after the halving, Bitcoin’s hash rate will inevitably drop quickly. De la Torre stated that a large or small mining farm, which has low electricity costs and operates the newest mining machines, will be fine regardless of how profitability could be affected in the short term. If a miner has high electricity costs and operates old machines, it will undoubtedly have big problems and will have to be disconnected.

Besides, the inability of the North American and European markets to obtain the latest-generation mining equipment leads to the possibility of a considerable decrease in hash rate. Unable to update the equipment, mining on the network will not be profitable for 30% of the miners that constitute the mining power of Bitcoin.

There have been reports on how Bitcoin Cash and Bitcoin SV miners behaved after the halving of both networks affected their profitability. Because of this behavior and the evidence from previous halvings, experts like De la Torre say that the Bitcoin network will have a dramatic hash rate drop after the reduction by half.

In early March, the hash rate of the Bitcoin network fell considerably. That occurred after the sharp drop in the price of BTC in the market, as a result of the coronavirus pandemic.

By Alexander Salazar

Experts Consider that Americans Could Invest Money in Subsidies with Cryptocurrencies

Maria Rodríguez
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Experts Consider that Americans Could Invest Money in Subsidies with Cryptocurrencies

Exchange platforms like Binance and Coinbase have experienced cryptocurrency purchases for amounts similar to Americans’ subsidies.

Some Americans may be considering investing government subsidies in the purchase of cryptocurrencies. Experts believe that the odds of investing in digital currencies will increase in the coming months. This procedure could be a way to save funds and face the great economic challenge that will come after overcoming the Covid-19 pandemic.

As part of a government measure to protect citizens, the administration of Donald Trump approved the payment of direct subsidies for Americans. This decision seeks to provide essential goods to support the quarantine.

Since last week, the US issued millions of checks with the amount of USD 1,200 to the most vulnerable citizens. In total, the government invested USD 80 million and deposited the money directly into the bank accounts of the people most affected by the disease.

Given this high liquidity, some Americans may be considering investing these funds in buying cryptocurrencies like Bitcoin, instead of making purchases of goods such as food and household items or personal hygiene, some experts consider.

One of the experts who is considering this hypothesis is Brian Armstrong, CEO of Coinbase. The executive recently published a tweet explaining that, during the last week, there has been a spontaneous growth in the purchase of cryptocurrencies on this exchange platform. He also assured that an important part of this increase was registered with deposits of up to USD 1,200.

Armstrong commented that until the second week of April, deposits on the platform of Coinbase accounted for 0.1 % in crypto purchases. He said that only this week, the figure tripled to 0.4 %.

The official explained that it is very possible because many Americans have begun to receive this subsidy and have decided to preserve the funds in cryptocurrencies. Most citizens are not working during the quarantine.

Although Armstrong assured that there is no way to verify this hypothesis, the possibility is feasible since most of the purchases were made for amounts close to or equal to USD 1,200.

Despite the economic disruptions that the United States of America has experienced in recent weeks due to the Covid-19 pandemic, and the increasing unemployment rate, there are still work activities that continue. In this way, economic experts indicate that the crisis has not yet come and that citizens may be looking for savings alternatives for the most difficult times.

In this sense, Binance US, another crypto-exchange platform, has also experienced an increase in deposits for the purchase of cryptocurrencies. “It appears that people have deposited exactly USD 1,200 in the past few days”, a company spokesperson said.

Despite this comment, the company declined to offer more details about the increase in its crypto-asset sales. Binance US recorded a large increase in deposits with an amount of USD 1,200, since last Thursday, April 16th. The cryptocurrency business has managed to regain profit after a slump in mid-March.

However, the precipitous drop in the stock price on the stock exchange, the decrease in profits in other forms of business, and the instability of some assets seem to give cryptocurrencies a higher level of confidence and security to keep savings at levels that avoid more losses in the future. In this way, cryptocurrencies could be acting as an important form to save money.

By María Rodríguez

People’s Bank of China Revealed that the Digital Yuan Will Not Generate Inflation

Maria Rodríguez
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People’s Bank of China Revealed that the Digital Yuan Will Not Generate Inflation

The Chinese government will use digital Yuan in a subsidy scheme for public sector workers. The credit of this Asian country will support this digital asset.

The People’s Bank of China responded to the concerns of some media about the digital Yuan, a new type of digital asset. The idea was to report the progress and characteristics of this new national currency.

The financial institution conducted most of the development and testing of this currency with high levels of security and control. Now, the People’s Bank of China (PBoC) decided to answer some questions of the citizens, given the launch of this digital asset, which would be in May.

A representative of the People’s Bank of China recently talked about the features of the new asset that will serve to pay subsidies in some cities of China. The executive mentioned that they conducted pilot tests on the use of this new currency. These tests were successful in cities such as Shenzhen, Xiongan, Suzhou, Chengdu, and Beijing, the location of the next winter Olympic games.

Although the country will launch this digital currency very soon to make some payments, the representative of the People’s Bank of China assured that citizens should not confuse the new tests of use with an official and public launch of the digital Yuan. The executive highlighted that the test of use will not affect commercial activities outside the test site.

“The current closed test of the digital Yuan will not affect the commercial activity of listed institutions, nor will it affect the RMB issuance or the circulation system, the financial market and the social economy outside the test environment”, he said.

The Chinese bank wants to prevent the issuance of the digital Yuan from making changes and modifications in the commercial and financial statistics of the country.

For this reason, the People’s Bank of China explained that those banks that will use the digital currency will pay 100% in reserves. This is the plan to avoid economic changes and also control the sale of the asset.

Main Features of the Digital Yuan

The bank hopes to take advantage of one important characteristic of the digital currency. The user can employ this digital asset even if he has no network signal.

In this way, the representative of the People’s Bank of China commented that the technology of this new currency would allow the system to function as if the user has paper money.

“In the absence of a network, as long as two mobile phones equipped with a DC / EP digital wallet are touched, the transfer or payment function can be realized”, he commented.

The bank also indicated that this new digital currency will not have affiliation with bank accounts. Besides, the digital Yuan will not have any relationship with the traditional banking system. This suggests that the financial institution will create a new digital system alien to the use of other circulating fiat currencies.

This new digital asset is different from conventional cryptocurrencies. Other crypto assets generally do not depend on any institution to circulate. But China’s monetary reserves will support the digital Yuan and the main financial institution of the country will manage this asset. For that reason, this case is different.

According to the statements of some Chinese government spokesmen, the digital Yuan will be less volatile than bitcoin. This is something that would guarantee stability in asset prices and the commercialization of the digital Yuan.

As a first instance, the government will use the digital Yuan in a subsidy scheme that the Chinese government maintains for public sector workers. This would be the first proof for the digital Yuan. After that, the government could consider using digital currency in other daily operations.

By María Rodríguez

Public Employees in China Will Receive Payment in Digital Currency

Maria Rodríguez
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Public Employees in China Will Receive Payment in Digital Currency

The People’s Bank of China will make the payment through a digital wallet next May.

Public employees in Suzhou City, China, will receive their first payment in digital currency next May. It is about an asset that the People’s Bank of China will issue. Asian government employees will be the first ones to receive DCEP, which is China’s first National Digital Currency. That name means Digital Currency Electronic Payment.

The news was revealed in a first instance by an official document clarifying that, since May, employees of the municipal government of Suzhou will receive a payment in this digital currency.

As local media indicated, the payment corresponds to 50% of the subsidies that the Chinese government grants to its employees to pay for transportation and other benefits.

It is worth noting that this digital currency will have the necessary support for its operation. Almost four state banks of China will issue this digital asset. These financial institutions are the Industrial and Commercial Bank of China (ICBC), the People’s Bank of China (PBOC), the Agricultural Bank of China (ABC), and the China Construction Bank (CCB).

Considering this movement as a government action, the China Star Market document orders all government institutions and organizations to sign DCEP issuance contracts directly with banks. This operation will serve to prepare these government institutions and organizations for the launch of the digital currency next May.

In this sense, the government urged its citizens to prepare for this new change. The institution advised public employees to download and install the digital wallets that would serve to deposit the digital asset. Likewise, the statement reminded that each banking institution will have its app that will be in charge of managing these subsidy funds.

A few days ago, the Agricultural Bank of China was testing a digital application that would serve as a crypto wallet. This tool would only serve a certain group of users who were considered part of a white list. This list allowed only its members to register their accounts for the digital wallet application.

On the other hand, the PBOC would have started, since December 2019, a group of pilot tests that would be in charge of managing digital accounts with DCEP. The institution reported that such tests were being conducted in some cities, such as Suzhou and Shenzhen.

It should be mentioned that, despite the recent viral outbreak of Covid-19, considered by the World Health Organization (WHO) as a Pandemic, the situation has not delayed processes. The People’s Bank of China mentioned that this type of work is “progressing smoothly”.

In this sense, some experts highlight that, even in these circumstances, these jobs must be prioritized. These jobs not only represent a significant advance in negotiations and financial procedures but could also be useful to combat Covid-19.

Some reports indicate that when China declared a health emergency, due to the Covid-19 outbreak, the country implemented a protocol for collecting cash, which may have been in high-risk areas.

This measure could help prevent the spread of the virus. In this way, developing digital financial alternatives can become a top priority for the Chinese government, especially during the pandemic.

By María Rodríguez

Singapore: Crypto Miners Will Not Pay Taxes If They Mine Without Intention of Business

Maria Rodríguez
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Singapore: Crypto Miners Will Not Pay Taxes If They Mine Without Intention of Business

Authorities will allow tax-free crypto mining if they determine that the action is only performed in a non-profit manner.

In new update of the tax guide in Singapore, the authorities revealed new considerations on some cryptocurrencies and mining tokens. Besides, the country established a classification system among the tokens used in different activities, such as payments, tokens issued by Initial Coin Offerings (ICOs), among others.

The Singapore Internal Revenue Authority (IRAS) was in charge of the guide and recently launched it. This guide covers the emissions and fluctuations of tokens in the hands of miners and companies. In this way, the guide will classify who should or should not pay taxes, according to his financial movements and the type of activity he is executing.

Companies Will Continue Paying Taxes When Using Tokens

Since the laws in Singapore do not contemplate the use of cryptocurrencies, representatives of the Singaporean authorities indicate that the tokens should not be considered as currency of circulation in the country, even if the users record the transactions they conducted using these digital assets.

Therefore, the authorities will not consider as “commercial exchange” any financial operation conducted by a company in the country with tokens of a different nature, which entails the payment of taxes.

This means that both the sale and the purchase of goods and services with digital currencies or tokens will mean tax obligations to the treasury. For this reason, miners must report to the authority the purchases and sales they execute regularly.

A statement accompanied the new update of the guide. This document says that “it is unlikely to create a taxable income”, this referring to the payment with tokens. Besides, the statement emphasizes that these tokens can “result in a deductible expense subject to the usual deduction rules”.

The Treatment of ICO

The authorities in Singapore will treat this type of digital currency as capital or income assets. The decision will depend on the reason for the shipment of these funds.

For this reason, Singapore considers the rewards that the founder obtains for the issue of an ICO as capital assets. But if the user issues this reward for services rendered, these digital assets will be considered as income.

Facilities for Amateur Miners

The guide details that Singapore will have a “light” deal with crypto miners. This consideration is possible since the collection of taxes will depend on the intentions of the miner.

“Miners may perform mining as a hobby or to hold the tokens mined as a long-term investment. If so, the disposal gains/ losses of the payment tokens are not taxable/ deductible. On the other hand, gains/ losses from the disposal of payment tokens by a miner assessed to be trading in nature would be taxable/ deductible”.

However, this measure has certain limitations, since, if it is possible to determine that the miner conducts the activity consistently and during very long periods, Singaporean authorities can consider that the motive of the miner is profit.

In this way, the authorities will determine if the miner is engaged in the mining process as a commercial income activity. Commercial mining in Singapore carries the payment of taxes on their profits.

By María Rodríguez

Survey Indicates Level of Trust in Cryptocurrencies as a Means of Digital Payment

Alexander Salazar
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Survey Indicates Level of Trust in Cryptocurrencies as a Means of Digital Payment

A group of users say that they trust other digital payment methods more than cryptocurrencies. In underdeveloped countries, there is greater interest in cryptocurrencies, but people do not usually use them.

A survey that the newspaper The Economist conducted shows data on the increase in the use of digital payment methods in the past year, including cryptocurrencies, which do not seem to be generating much trust among users.

According to the study, digital currencies issued by government institutions appear to be gaining popularity as a digital means of payment. In this regard, the researchers state that this type of digital currency is “the next great development.”

They say that blockchain-based cryptocurrencies without any commercial or government endorsement are probably the best-known decentralized systems. However, they explain that there are new players in the game since financial and technological organizations are developing a new variety of cryptocurrencies based on similar technology. Governments consider that they can issue their digital currencies to transmit confidence to users while offering them the advantages of systems similar to cryptocurrencies.

Half of the people that The Economist interviewed reside in countries with developed economies, like the UK, Singapore, France, the USA, and Australia. The other half resides in countries with developing or emerging markets, among which are Brazil, Turkey, Vietnam, South Africa, and the Philippines. The sample consisted of 3,048 people, 61% of whom were between 18 and 38 years old, these being the generations that have best adopted modern digital technologies, according to the study.

About 64% of those surveyed stated that in the past year they have used digital payment methods such as PayPal, WeChat Pay, TransferWise, among others, to make more than half of their purchases. Meanwhile, 80% of the respondents were willing to use these payment methods more frequently and 28% stated that they would probably make digital payments in most of their transactions, instead of using physical money.

Cryptocurrencies in Emerging Countries

Of the total sample, only 4% claimed that they would not make digital payments, a figure that fell to 1% in the case of emerging economies. However, the researchers consider that these economies are more receptive to digital payment methods since 41% of respondents in emerging countries said that they used or owned cryptocurrencies, while only 19% in developed countries did.

Of those interviewed in developed economies, 79% claim to know or be aware of cryptocurrencies, whilst this figure increases to 92% in emerging economies, giving a total average of 85%.

The study collected comments from Antony Lewis, author of The Basics of Bitcoins and Blockchains: An Introduction to Cryptocurrencies and the Technology that Powers Them. He says that some groups prefer to use digital currencies rather than physical money, but it is necessary to have certain skills and competencies to handle digital currencies, a level of experimentation that not everyone has.

In the researchers’ opinion, the survey seems to confirm these ideas, since those respondents with university training stated that they have already used cryptocurrencies, a reduced trend among those not having a high school diploma or equivalent training.

Finally, 10% of the respondents consider that people in their countries use digital payments over other physical methods. The researchers also consider that there is a lot of space to cover regarding digital payments, considering the increasing access to mobile devices and other technological innovations.

By Alexander Salazar

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