What happens once mining reward gets cut in half?

[yuvadm]

Sometime around the end of 2012 the mining reward is expected to be cut in half from 50BTC/block to 25BTC/block.

What effect will this have? Doesn't this mean it will be less economic to run a Bitcoin miner? Will hashing power be severely reduced? Will BTC prices soar (or alternatively, crash)?

[danalex]

Processing power is always increasing, according to Moore's Law.

[sobriket]

There may be a bit of volatility around this moment but reward halving has mostly been priced in already

[Ivica]

If asics are coming, it wouldn't affect much their owners (since all asic would do is mine coins, while with gpu you can play games). On other hand gpu miners might quit at all. Though everything depends on current bitcoin market value. If price skyrocket, there'd probably still be sense to continue mining with gpu.

[mhughes]

If a bunch of people drop out of the mining business, won't the difficulty go down significantly making the rate that new blocks are confirmed stay roughly equal?

[BitcoinINV]

I think when it halfs we will see a large drop in difficulty, for the simple reason is people feel it will not be worth it. The large miners will stick around while the smaller ones just go off and sell there equipment cheep. As for the next gen hardware...... I think Nov is the earliest, why? Cause the C.E.O slipped up and said in a post yesterday 6 more weeks. Count 6 from yesterday....... Nov, 2nd would be the time frame.

[knight22]

Who knows? This is purely experimental but free market laws predicts that halving the bitcoin will make bitcoin worth more within an undetermined range of time. Of course this gonna gives a shock to mining operations. Small miners who cannot afford the mining operational cost will simply stop mining until the prices increase and then start mining again. I don't think the prices will soar though but maybe there will be a speculative bubble with a correction following.

[0k4m1]

Processing power is always increasing, according to Moore's Law.

This is a fact.
And Technological Singularity is predicted on ~2045.
http://en.wikipedia.org/wiki/Technological_singularity

[Monkey1]

Difficulty is expected to halve in early Dec.  BFL have stated that they expect to ship all preorder ASICs before Xmas, which will at least double the hashing power of the network. thereofre, if you remain on your existing kit, your reward will be at most a quarter of what it is now.  This will affect miners, forcing many to quit and others to buy ASIC.  The price will not be directly affected as this is not directly linked to mining!  whether it goes up or down is anyones guess!

[fourcorners]

Difficulty is based on the speculative prices compared with electricity costs.  I think in December there will be a combination of bitcoin price increase and difficulty decrease but we will not see prices double or difficulty halve.  Supply dry up will make sure a price increase happens.  Unfortunately this is a deflationary currency and people who expect the price to go up are less willing to give up their coin now which is prematurely floating prices up.

[kgonepostl]

On a side question. I'm thinking about dropping down a few hundred to buy four more jalapenos. If I have the money. Wise investment?

[FreeMoney]

Processing power is always increasing, according to Moore's Law.

This is a fact.
And Technological Singularity is predicted on ~2045.
http://en.wikipedia.org/wiki/Technological_singularity

Just because technology improves overall doesn't mean an increasing effort will be applied even when the reward for a task shrinks.

Unless the value goes up by a lot or the ASICs actually arrive there will be some downward difficulty adjustment.

[PuertoLibre]

Has anyone made a graph/simulation of what the difficulty vs profitability level will be over time with ASIC?

I am planning to pre-order one of the Avalon units and I would like to know what an ASIC investment is going to return in the long run.

[Bitznbitz]

About the only thing thats certain is... the reward will be at 25.

[BobbyJo]

The difficulty will go up when ASIC hits.  However, they use a lot less electricity , so it gets people who pay for electricity, back in the game.  I dont think the reward halving will have much effect initially!