medium.com
The Halving reduces the reward that miners receive for confirming transactions on the Bitcoin blockchain, and subsequently, Bitcoin's rate of supply will be cut in half.
Here's a deep dive I wrote on what the Halving is, and why it matters:
https://medium.com/ryze-crypto-digest/the-bitcoin-halving-explained-d1dd1c7833f0
> This means that things that are hard to create, and whose creation can’t be faked, have value. Bitcoin, like gold and other precious metals, has both of these properties. Mining Bitcoin requires large amounts of electricity and computational power. In fact, the Bitcoin network uses a similar amount of energy every year as the entire country of Venezuela.
Actually a distributed ledger is not the same as a rare metal:
1. Unlike gold, Bitcoin can cease to exist. If nobody keeps the blockchain alive, it doesn't exist any more. Try to make gold disappear from the ground!
2. Unlike gold, the operators can decide to increase supply. Or reduce it. By orders of magnitude. It's a code change. Try that with gold.
3. Forks are abundant. Good luck trying to invent a new element.
4. The economical benefit of Bitcoins is much too small to explain the energy use. It can't even keep up with the transaction count of a small town. The energy expenses can only be justified by expected future return. This is actually where Bitcoin is somewhat comparable to gold as a valuable. It's just that gold actually has real-world uses besides acting as currency. So we know the price for gold won't go to zero. Unless of course we find ways to defy our current physics!
> 1. Unlike gold, Bitcoin can cease to exist. If nobody keeps the blockchain alive, it doesn't exist any more. Try to make gold disappear from the ground!
To kill the blockchain, one would have to destroy every single copy. Try finding all of the thousands of copies of the blockchain archives around the world and make them disappear.
> 2. Unlike gold, the operators can decide to increase supply. Or reduce it. By orders of magnitude. It's a code change. Try that with gold.
The "operators" cannot arbitrarily decide to increase supply. It would require a coordinated effort by developers, miners, exchanges and other node operators. As past attempts to hardfork the bitcoin blockchain have shown, this is extraordinarily difficult.
The value of gold can theoretically be decreased by orders of magnitude which is effectively the same thing as increasing supply. Through a coordinated effort by buyers and sellers the value of gold could decrease 10x tomorrow. This is also extraordinarily difficult.
> 3. Forks are abundant. Good luck trying to invent a new element.
Yes. Bitcoin is different than gold in this respect. I would argue this is one of the advantages that digital currency has over a physical currency. Forks encourage innovation. A fork of Bitcoin does not affect the main chain.
> 4. The economical benefit of Bitcoins is much too small to explain the energy use. It can't even keep up with the transaction count of a small town. The energy expenses can only be justified by expected future return. This is actually where Bitcoin is somewhat comparable to gold as a valuable. It's just that gold actually has real-world uses besides acting as currency. So we know the price for gold won't go to zero. Unless of course we find ways to defy our current physics!
The market disagrees with your first statement. If there is no real economic benefit to Bitcoin, then the market has been operating irrationally for many years. While this is possible, it is becoming increasingly difficult to justify a conclusion that the market is irrational.
Bitcoin also has "real-world" uses besides currency. There are timestamping functions and tokenization protocols that provide a benefit beyond currency. These are all digital uses, but very real.
You claim there is a "main chain" in Bitcoin as if it were a physical fact. That's one of the myths! It's called consensus protocol for a reason. Forks are part of the protocol and sometimes splits require manual intervention to stabilize the network.
The scarcity of Bitcoin is arbitrary. Markets being irrational for years is nothing new. As long as there is influx of capital, it keeps going. Like gods or other fiat currencies, Bitcoin depends on people believing in it to exist.
I agree that there are other uses for Bitcoin but they are marginal. The high transaction costs of bitcoin mean that if we ever wanted those features badly enough, a service with less energy consumption would be established.
An asteroid containing gold can be mined to drastically increase the supply. A gold asteroid could just hit Earth today and we could increase the supply with current technology.
Yes this is a silly scenario but it's possible and just as likely as Bitcoin randomly inflating its supply. Both can pretty much be written off as impossible when discussing supply of Gold or Bitcoin.
The guarantees of Bitcoin rely on technology (algorithms, Internet-connectivity) and society (self-interest). If any of those things fail (say a broken hash, a network partition, or just disinterest) Bitcoin can't fulfill its promises anymore. But one can believe in them holding for a little while longer. If others do the same, it keeps going.
First we'll debate if Bitcoin is a Ponzi scam.
Next it'll be whether there's any non-criminal use case.
Then how it's not "real money".
Please, won't some very intelligent dude please educate us all about Dutch tulips?
I see the constant rehashing as a byproduct of the fact that the same old topics get reposted over and over again as they resurge in relevance.
I see this as a byproduct of crowd consciousness. Not everyone is going to see a post before it dips out of sight, so it's bound to pop back up again eventually (if it becomes relevant again), and then new people will see the second/third/fourth postings.
As such, the same rebuttals have to be posted over and over again, so that the new audience has contextual information.
It's not an easy problem to solve.
Bitcoin started with its value essentially at nothing, and the early "investors" were able to create tons of it out of thin air.
Provided they held onto that Bitcoin, the "value" of the "currency" only increased as more and more people bought into the notion that it had value.
You can see how this would heavily incentivize early investors/miners/buyers to perpetuate the scheme.
Many early "investors" in Bitcoin made millions of dollars off of their gambles. I personally know quite a few of those people.
I hate to pull the wool away from your eyes, but that's not a deflationary, stable currency. That's a Ponzi scheme.
You can make this argument for any created product, especially any currency.
"out of thin air"
Yes. That is currently how most currencies work.
If the US government fails so spectacularly that the US Dollar loses value, do you honestly think that the internet will even be working at that point? And without functioning internet, there won't be anyone mining bitcoin, which means that control of the blockchain will be easily seized by whoever has control of the largest mining pool. This would very quickly result in complete devaluation of Bitcoin (but not before whoever took control would be able to cash in a LOT of money).
If we had truly decentralized peer-to-peer internet (think ham radio over mesh with millions of portable devices or something) with truly peer-to-peer DNS and full encryption, and no centralized control, then MAYBE bitcoin might have a chance if the government collapsed. But we don't. So (at least for now), the idea that Bitcoin would function as a viable currency in that scenario is a giant joke.
It's true that the US Dollar is inflationary (while Bitcoin is "deflationary"), but that is by design to drive economic growth. Simulations (and history) have shown that with a slightly inflationary economy, people are more likely to spend their money instead of holding onto it. This causes a constant cycle of spending and earning, driving more goods to be created, and causing more people to do more work.
Deflationary economies, on the other hand, often result with the economy stagnating (because people are more inclined to just hold onto their money instead of spending it). You could argue that this is better (because people like the idea of their money gaining in value over time), but to make that argument, you would have to prove that economic growth is a bad thing.
As to the idea that it isn't subject to whims or political stability, I would argue that one merely has to look at the history of Bitcoin's price to prove that statement is false. Bitcoin's price is highly reactive to political news and random whims of the market (as well as manipulation by bad actors).
I'm not saying that crypto-currency doesn't have its place. I'm just pointing out that a lot of the fundamental principles that people swear by when it comes to Bitcoin are flawed.
Nit: Revenue to miners decreases 50% if price stays the same.
Gold may have a finite supply, but it's been mined for millenia and has slowly increased its supply rate over time, and will likely continue to do so in our lifetime.
In contrast, Bitcoin's emission which ranges from 2009 through 2140 is heavily tilted to the first few years.
Its final century from 2040 through 2140 accounts for only about 0.5% of emission.
The only point of the halvings is to be able to claim "finite supply". A constant reward would still have the yearly supply inflation rate (stock to flow ratio) going to 0, albeit more slowly. So crucially, supply would still be scarce, would be more predictable (time independent), more fair to late adopters, and be much closer to Gold's emission over our lifetime.
It would also avoid the inherent instability [1] of mining rewards dominated by transaction fees.
If we further consider the fact that coins inevitably get lost, then even a constant reward will yield a softcap of supply, where yearly emission merely serves to balance the yearly losses.
Unfortunately, practically all cryptocurrencies subscribe to the notion that early miners must receive greater rewards, even when they often already enjoy lower difficulty.
[1] https://www.cs.princeton.edu/~arvindn/publications/mining_CC...