How to maintain profitability by halving Zcash

Reward halving is a common element of many different forms of cryptocurrency, known to have a typical impact on a coin’s supply, difficulty, and price. For many cryptocurrencies, these halving mechanisms are built into the code in order to lower generation rates and inflation, which can help extend the life of the coin even in the presence of increased demand.

This is what happened with the Bitcoin network in May, when its block reward halved for the third time and was reduced to 6.25 Bitcoin (BTC). Now, it’s Zcash’s turn, as the digital asset network is set to undergo its first halving in November, as soon as its 1,046,400th block is mined.

Here’s a closer look at the upcoming Zcash halving; what it will mean for the world of cryptocurrencies; and how you can maximize profitability beyond the event.

What is Zcash?

Zcash (ZEC) was launched in 2016 as a proof-of-work cryptocurrency that uses screened transactions to protect user information. It is currently ranked as the 24th largest cryptocurrency by market value according to CoinMarketCap.

Like Bitcoin, Zcash’s total supply is limited to 21 million, meaning that only 21 million coins will ever be able to be mined. The block reward for Zcash will be halved from ZEC 6.25 to ZEC 3.125 by the end of the year, something many expect to help its abnormally high inflation rate.

The Zcash inflation rate

Perhaps Zcash’s biggest criticism at this point has been its inflation rate, which is significantly higher than that of its counterparts: ZEC’s annualized inflation rate is currently 26.53% at the time of this writing. article, according to the ViewBase data source. This implies that Zcash’s circulating supply increases by around 26.5% per year, while most other forms of cryptography vary between 1.8% and 7%.

The halving is expected to help this, as the inflation rate will essentially be cut in half along with the block reward.

Zcash halving increase

With previous halves of several cryptocurrencies, we generally see a positive impact on price both before and after the event, particularly with the three halves of Bitcoin that have occurred up to this point. Analysts expect the Zcash halving and subsequent drop in inflation to trigger a long-awaited price jump for the asset.

The end of the founder’s reward

When Zcash launched in 2016, it was established with the following rewards assignment:

• 80% of the mining rewards went to miners.
• 15% went to a group that included investors and founders.
• 5% was kept on hand to “fund basic support functions” for the Electric Coin Company, the creator of Zcash.

This reward structure has faced its share of backlash from the Zcash community. Fortunately, the “Founder’s Reward”, as is known, will expire in November along with the halving. It will be replaced with a new community approved fund similar to this:

• However, 80% of the mining rewards will be awarded to miners.
• 20% will go to infrastructure development and marketing: 8% of which will go to a third-party grant program, 7% will go to the Electric Coin Company and 5% to the Zcash Foundation.

This new reward structure is expected to foster the long-term development of the network, but there are still additional steps that miners will need to take to remain profitable after the halving.

Maximize post-halving profits

The decrease in reward and supply following the halving of Zcash will lead to greater difficulty and the need for a more powerful operation to maximize profits.

There are two key ways to tackle this challenge: finding a more affordable miner hosting strategy and upgrading the mining hardware.

A large number of users currently rely on Bitmain’s Antminer Z11 and Antminer Z9 to meet their Zcash needs, in addition to the Innosilicon A9. These devices will be very successful after the halving and should look to be replaced with the new high-powered Antminer Z15.

If Bitcoin’s halving provided a lesson, it was this: don’t wait to upgrade your hardware, as it could easily be out of stock or delayed once the halving is reached, forcing you to wait weeks or months to return to profitability. A device upgrade, along with a reputable hosting provider, is a strategic solution to staying profitable in November and beyond.

This article contains no investment advice or recommendations. Every investment and trading move carries risk, readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed herein are solely the author’s and do not necessarily reflect or represent the views and opinions of Cointelegraph.