How to remain profitable through the halving of Zcash

close-up photo of Zcash ZEC cryptocurrency physical coin on the tablet computer showing stock market charts. trading zcash cryptocoin concept on the wooden table

Date Published

08/13/2020

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

This is what we saw happen with bitcoin back in May, when its block reward halved for the third time and was reduced to 6.25 BTC.

Now it is Zcash’s turn, as the digital asset is set to undergo its first halving sometime in November – as soon as its 1,046,400th block has been mined.

Here is a closer look at the upcoming halving of Zcash, what it will mean for the world of crypto, and how you can go about maximizing profitability beyond the event.

What is Zcash?

Zcash launched in 2016 as a proof-of-work cryptocurrency (like bitcoin) that uses shielded transactions to protect user information. It is currently the 25th-largest form of crypto by market value per CoinMarketCap.

zcash price graph

Like bitcoin, the total supply of Zcash is capped at 21 million, meaning only 21 million coins can ever be mined into existence. The block reward for Zcash is set to be halved from 6.25 ZEC to 3.125 ZEC later this year  – which many expect to help its abnormally high inflation rate.

Inflation rate of Zcash

Perhaps the greatest criticism of Zcash to this point has been its inflation rate, which is significantly higher than that of its counterparts – currently standing at 26.6% at the time of this post. This implies that the circulating supply of Zcash increases by 26.6% annually – while most other forms of crypto range from just 1%-7%.

annualized inflation rate of zcash and several other top cryptocurrencies

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

Zcash halving boost

With previous halvings of different cryptos, we generally see a positive impact on price both before and after the event – particularly with the three bitcoin halvings that have taken place up to this point.

Analysts expect the halving of Zcash and the consequent drop in inflation to spark a long-awaited price jump for the asset.

The end of the founder’s reward

When Zcash launched in 2016, it was set up with the following reward allocation:

  • 80% of mining rewards were allocated to miners
  • 15% were allocated to a group that included investors and founders
  • 5% were kept available to “fund core support functions” for the Electric Coin Company – the creator of Zcash

This reward structure faced its share of backlash from the Zcash community. Thankfully, the “founder’s reward” as it has been known is set to expire in November alongside the halving. It will be replaced with a new, community-approved fund that looks like this:

  • 80% of mining rewards will still be allocated to miners
  • 20% will go toward infrastructure and marketing development
    • 8% of this will go toward a third-party grant program
    • 7% will go to the Electric Coin Company
    • 5% will go to the Zcash Foundation

This new reward structure should benefit the long-term development of the network, but there are still additional steps miners will need to take in order to remain profitable after the halving.

Maximizing post-halving profits

The decreased reward and supply following the halving of Zcash will lead to increased difficulty and the need for a more highly powered operation in order to maximize profits.

There are two key ways to navigate this challenge – finding a more cost-effective miner hosting strategy and upgrading your mining hardware.

A great number of users currently rely on Bitmain’s Antminer Z11 and Antminer Z9 in order to meet their Zcash needs – in addition to the Innosilicon A9. These devices will take a big hit following the halving, and should look to be replaced with the new, high-powered Antminer Z15.

Bitmain Antminer Z15

The Antminer Z15 is one of the most profitable miners on the market right now, boasting a max hash rate of 420 ksol/s.

bitmain antminer z15 profitability graph

If the bitcoin halving provided any lesson, it was to not wait to upgrade your hardware, as it could easily be sold out or delayed once the halving hits, forcing you to wait weeks or months to return to profitability. A device upgrade coupled with a reliable hosting provider is a strategic solution to remaining profitable this November and beyond.

Secure optimal returns with Compute North

As the world of crypto continues to grow and evolve, there has never been a better time to get involved and invest in the future of this cutting-edge technology.

Compute North owns and operates state-of-the-art facilities designed specifically to make the most of blockchain technology. We have the vision to adapt to market demands, recognizing there are many applications being designed that do not require maximum uptime and hyper-scale redundancy. Each of our campuses is constructed in a strategic location across the U.S. to allow users to focus solely on ROI and less on logistics.

With years of mining colocation experience, we have best-in-class solutions designed to help you maximize business operations. Benefits of our services include:

  • Cost-competitive infrastructure powered by renewable energy
  • Secure environment to keep your hardware and your data safe
  • Core infrastructure with power, space, ambient air cooling, internet access, physical racks and security
  • And more

Contact us to learn more.

Date Published

08/13/2020

Author

First Scribe

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