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Comment by trynewideas | Hacker News Reader

MarketWatch: https://www.marketwatch.com/story/what-is-the-bitcoin-halvin...

What is the halving or halvening?

The event is known as the “halving” or “halvening,” and occurs every four years, where the rewards for those who support bitcoin are slashed, quite literally, in half.

So-called bitcoin miners expend tremendous amounts of computing power to verify transactions and link them, digitally into a block, hence the term blockchain. Miners on the blockchain — the digital ledger technology that underpins the currency — receive a precise number of bitcoins for their efforts in solving a complex puzzle.

That computing effort is at the very heart of the digital currency that was created 11 years ago by a person, or persons, identifying themselves as Satoshi Nakamoto.

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What does that mean in even plainer English?

Is Bitcoin now half as valuable? Did mining it get easier/harder? Less profitable to mine, but existing Bitcoins still have same value as before?

mining it will result in half the reward.

But existing Bitcoin still have the same value?

Does this mean the end of businesses that seemed to exist only to mine using custom computers and GPUs? Because their revenue stream has been cut in half?

The event will not exactly come as a surprise for the miners: the date was more or less built-in the bitcoin algorithm from day one.

If it means the end of their business, it means their planning was fairly poor.

The block reward has been cut in half. So if they were mining for 0 transaction fees then their revenue would be cut in half, but nobody does that. The actual change will thus be less than half, and it's possible transaction fees will increase.

Mining and immediately selling right now will get half the reward.

You get half the amount of BTC as before, regardless of the market price

More than half, since you still get the full transaction fees.

The last statement, yes. Miners receive less new Bitcoin for each block, which, of course, assuming the price stays the same, means that their mining becomes less profitable. The price itself isn't directly tied to the block reward, though the market has recently been more volatile in anticipation of the halving.

It's a little more nuanced than just getting paid half as much to mine. Miners earn income form two sources, a per-block "subsidy" (source of the mining analogy, this is simply materialized and given to the miner), and per-transaction "fee" for each transaction included in a blocks (these fees are paid by the transaction initiator). Only the subsidy is getting halved. I think the long term vision was the fees would be the main source of income, but they've never made it past around 30%, and are currently only about 5-10% of the total reward.

Does this suggest that transaction demand severely lags the inventor's assumptions when building the coin parameters?

I don't think so, after all there was a soft-fork (SegWit) and a few hard-forks (Bitcoin Classic most famously) just to address the high volume of transactions. I think the creator did not anticipate bitcoins becoming so valuable. The high value means that people are only willing to pay small fractions of the block reward as fees, because that's worth a lot of money.

The payout for mining bitcoins was cut in half. The number of total available bitcoins in the system remained stable.

No: it is the value of mining, nothing to do with the value of the token. AFAIK.

In relatively plain language, this means that new bitcoins are being created at roughly half the rate as before.

> Is Bitcoin now half as valuable?

Bitcoin's value, like any currency, is dictated by the market.

> Did mining it get easier/harder?

The difficulty hasn't changed (although it might if this causes a significant drop in the number of miners).

> Less profitable to mine, but existing Bitcoins still have same value as before?

It is less profitable to mine bitcoin. The impact this will have on the value of Bitcoin remains to be seen.

> Bitcoin's value, like any currency, is dictated by the market.

... is dictated by the whims of Bitfinex and Tether

The markets for a lot of esoteric commodities are dictated by the whims of a select few organizations. It's partially how so many of these end up being control by cartels, the demand for cranberries or topaz is just no where near that of soy beans and oil, making it relatively easy to corner the market.

True, and there are also commodity markets that are not controlled by an oligopsony, which truly are controlled by the market.

It's an important distinction to make, because the statment "Oil's value is controlled by the market" isn't very true.

> Bitcoin's value, like any currency, is dictated by the market.

Yeah, no. It's not a currency.

https://medium.com/s/the-crypto-collection/play-bitcoin-reme...

> Bitcoin lies in the same economic category as financial games like poker, roulette, and the lottery. These are all zero-sum games. The property binding all zero-sum games together is that the amount of resources contributed to the pot is precisely equal to the amount that is paid out. Because nothing additional is created in a zero-sum game, for every player who wins something from the pot, there must be a loser.

Any market that is just a market is a zero sum game.... One cannot create value from trading.

> One cannot create value from trading.

I think you're wrong.

An illustration could be McDonald's offering of a burger for $1, where you'd prefer burger and McDonald's would prefer $1. If you give them $1 and McDonald's give you the burger, both of you would be better off.

The underlying assumption is that your utility of the burger is greater than $1. Which is true because MacDonald is very, very efficient at making burgers (compared to you).

With bitcoin, it's a speculative trade. Everybody is "equally" good at making a coin. So the trade is happening purely due to an expectation of future utility, which may or may not come.

So therefore, speculation is zero sum.

> due to an expectation of future utility, which may or may not come.

It's been 11 years and there's not an even idea of what legit utility it might have that existing tools and protocols do not fulfill. A significant proportion of suggestions could be done much better with git of all things...

Isn't it the opposite, that any free market is not zero-sum? If two parties trade it means that each offers the other something they value more, so both parties end up in a better situation than before, thus increasing value.

I'm not sure why this is getting downvoted. Even prominent Bitcoin promoter Fred Wilson admitted that Bitcoin wasn't viable as a currency: https://avc.com/2017/08/store-of-value-vs-payment-system/

A couple years back, an NYT writer tried living on Bitcoin: https://www.nytimes.com/2018/04/16/nyregion/new-york-today-l...

It didn't work. It doesn't function as a currency. Whatever the intention, it's a speculative, high-volatility commodity with no use value traded in an unregulated market.

Would you say the same thing about gold? Genuinely curious, since obviously Bitcoin is frequently compared to gold as a store of value instead of a unit of exchange.

The most persuasive defense of Bitcoin as a store of value is that the world needs precisely one digital store of value, and game theory may dictate that it will end up being Bitcoin.

But yes, Bitcoin is obviously ridiculously volatile. I tell friends that there is money to be made, but you need to have a very strong stomach for it.

> the world needs precisely one digital store of value

that's an assumption, not a fact. The existence of an object doesn't automatically prove that the world needs that object's existence.

May be the world _never_ needs such a method, given existing mechanisms already fullfill such a need (e.g., a bank account/credit card).

Would I say what? That it's a "speculative, high-volatility commodity with no use value traded in an unregulated market"? No. Gold has use value and is generally traded in regulated markets.

If something is volatile and great for speculation, it's a bad store of value. So I don't think Bitcoin qualifies as that either.

I’m not sure why you’re confused about it being downvoted.

1) Whether or not it meets the (or someone’s preferred) definition of currency is wholly incidental to the answerer’s explanation, so even if correct, this is not the place to make the point.

2) Bizarre non-sequitur that equates finiteness of currency with zero sum utility which is a real stretch and easy to find counterexamples for (eg chore tokens).

For the cherry on top, it links Medium as a main source.

Is that a good enough justification to downvote?

This is splitting hairs.

Sure, everything can be used as a currency. Gold, bitcoins, fiat cash, snackpack puddings at lunch, seashells, etc.

Then there are qualities that make something a good currency, by modern standards. As others have pointed out with links to examples, being deflationary, irreversible, volatile, and having low coverage with unpredictable fees are traits that make Bitcoin not a very good currency. Yes you can hand wave about future promises to be a great currency or chore tokens, but that does not reflect the utility of Bitcoin right now as a good currency.

I wasn't addressing whether bitcoin is or isn't a good currency. I was explaining why I downnvoted a comment that argued to that effect.

Are you saying that every comment whose conclusion happens to right should be upvoted (or at least not downvoted)? If so, that would be a mistake. If you present bad reasons to believe correct conclusion X, you are hurting the discussion just as much as if you argued for not-X. And the reasons given in that comment (fixed quantity implies zero-sum utility over such transactions) are bad reasons to believe bitcoin is not a currency.

Furthermore, there's still the fact that the commenter was latching onto a minor, tangential point and blowing it up to be the focus of the discussion. That's also an anti-pattern.

If you want to argue that bitcoin makes for a bad currency, great! I would just encourage you to bring it up in a place where it's actually relevant to the article or comment it replies to, and do so with reasons that pass simple sanity checks.

So you’re saying someone can make the comment stating it’s a currency but it can’t be refuted? Where then should this statement be discussed if not here? Should we start another thread to discuss the this specific comment and it’s reply? Further, the entire downvote system harms the conversation more as people leave or sit out conversations due to their voice being stifled by some random(s) on the internet. Lastly why is medium a bad choice? Legitimate articles have to be posted somewhere and most people don’t want to go through the trouble of setting up their own domain. If there were a custom domain in front of that medium link would you have cared?

>So you’re saying someone can make the comment stating it’s a currency but it can’t be refuted? Where then should this statement be discussed if not here? Should we start another thread to discuss the this specific comment and it’s reply?

No, I'm saying that if the bit about it being a currency was incidental to the core point, then you shouldn't turn the thread into a debate about whether it is a currency; you should use replies there to address what was the commenter's core point, which began as explanation of the mechanics of the halving.

Are you seriously saying that that there are no other comments on this discussion where it's actually relevant that Bitcoin is a currency and you can't bear to take those discussions there?

>Further, the entire downvote system harms the conversation more as people leave or sit out conversations due to their voice being stifled by some random(s) on the internet

The comment also gave a very bad reason to believe that bitcoin isn't a currency, and yes, that was polluting the discussion. No one has yet stood up to defend that argument, so I think I was on the right track.

>Lastly why is medium a bad choice?

Because it's an annoying site with every UX and privacy anti-pattern. ("Excuse the interruption...") But again, that was just on top of the two worse sins -- changing the core discussion, and presenting a poorly thought reason.

If you want to be Big Mad at somebody, pick the guy who introduced the notion of bitcoin-as-currency as part of the explanation. But once that was introduced as part of how to value it, it was reasonable to reply to it.

This, thanks.

> For the cherry on top, it links Medium as a main source.

No, I link Medium as a good explanation. Is there a reason an easy to understand explanation can't be on Medium?

Are you familiar with the idiom "cherry on top"? There were two much more important reasons before that one. If you want to defend your comment, start with those.

And if you were correctly representing the Medium article, then it's still a bad argument for the reason I gave. I would recommend using a different argument, or finding a more correct point to draw from that article.

But then, as mentioned before, you were still blowing up a tangential, non-central point (whether bitcoin is "a currency"), and that still makes it an unhelpful comment, for making the point there. The comment would have communicated just about the same thing if it said, "bitcoin's value, like any financial asset, is determined by the market"; nothing in the comment was making major inferences specifically from bitcoin's status as a currency.

Whenever I see things like this, it reminds me of articles about VR being dead and how its obviously not actually useful or interesting.

It has always had potential to be a currency, but it requires a context of use in order to actually function as a currency. That context is still being established, and until it is, any basic evaluation of "is bitcoin a currency" will result in a "no".

After a dozen years of "real soon now", there's no particular reason to think the context is still being established.

It becomes less profitable to mine, so probably less people will mine it. It reduces the potential amount of BTC that miners have to sell to recover their costs. The idea is that less selling will increase price.

Actually the transaction fees accounted for over 12% of the block reward for block 630000

Also, it may help to think about it this way: you don't mine the subsidy, you mine the transactions and reap the transaction fees. The subsidy, which halves ever 210000 blocks, is just that, a subsidy.

Imagine if more subsidies (like the US subsidy for corn that still exists since the first great depression) had been hard coded to expire?

It's been a slippery slope. Now the FED has to directly purchase ETFs to "rescue the market" from itself: https://twitter.com/boes_/status/1260029253145378818?s=20

Its like when Saudi Arabia and all OPEC nations cut their oil output in half, without all the drama.

easy to understand right?

Oil value is based on supply and demand. Bitcoin value is purely arbitrary.

a halving has nothing to do with its value. demand stays the same, supply cut in half. analogy fits no matter which asset class you happen to respect more

Supply growth cut in half. Unlike oil, BTC doesn't get used up.

Yes, supply growth. A semantical distinction not used in any other asset class so why here? Maybe it does better help someone understand, here's to hoping.

But in any case, BTC does get burned in a variety of ways - immovable unable to be spent - in predictable ways based on the poor but improving user experiences. When it isn't burned, people look at the days destroyed metric to understand the actual supply.

I suppose it's more apt to say that demand is arbitrary. Demand is currently based on perceived demand.

The 'ore' has half as much in it.

It makes mining less rewarding. It's not ½ because miners also get transaction fees.

"Mining" is a brute force search for a solution to a cryptographic math problem. The difficulty of that math problem is adjusted so a solution is found about once every ten minutes.

Whomever solves it get's a reward + whatever transaction fees happened since the last solution. That reward was initially 50 BTC, it has halved 4 times now, 50,25,12.5, now 6.25.

Something like a lottery that gets drawn every ten minutes, but instead of somebody rewarding you, you just have to show the network that you found the solution.

After the halving, the reward per round is... well cut in half.

This affects mining profitability. Puts lots of hardware in locations at negative profitability so they'll have to shut down and buy new hardware, find cheaper electricity, etc.

Whatever happens, difficulty will be adjusted so the same 10ish minute block reward time is maintained.

What does this do to value? Eh, the bitcoin market isn't very rational or consistent. Miners will have less to sell, certainly, but people will have all sorts of ideas of what it will do to the price of bitcoin and since so much of bitcoin is speculation and so little is using it for any real transactional purpose, who knows?

What triggers this halving? Given the distributed nature of bitcoin it probably wasn't some central entity, wasn't it?

It's built into the protocol. After X number of blocks mined, the reward paid for a mined block halves. This repeats every 4 years until all blocks are mined (about 100 years from now).

Block count. Every 210,000 blocks

The Bitcoin code is set to halve block rewards every 210,000 blocks. If a miner attempts to mine a block with a too-high reward, the network nodes will reject it as invalid.

> Whatever happens, difficulty will be adjusted so the same 10ish minute block reward time is maintained.

How is this calculation distributed and agreed upon?

Is there really some constant "10 minutes" hard-coded into all mining clients, who then must all compute the difficulty based on how long the previous block took?

Or is the "10 minutes" an emergent property of some other calculation?

The bitcoin algorithm periodically adjusts the difficulty of mining a valid block hash in order to keep it around 10 mins per block on average.

If, in the previous 2016 blocks, the average block took less than ten minutes to mine then the difficulty increases and vice-versa.

https://en.bitcoin.it/wiki/Difficulty

https://github.com/bitcoinbook/bitcoinbook/blob/develop/ch10...

Good read about it.

Completing the mining of 1 block of bitcoin now rewards half as many bitcoins as it used to. Bitcoin hyper-bulls think this is a massive event and believe it will lead to Bitcoin rocketing to $300K-$500k by next year. Bitcoin increased in value by hundreds to thousands of percent after the last 2 halvings but whether this is a cause and effect relation is not clear. Both were during the Bitcoin Hype train.

miners get paid less for the same work

This is an ignorant question, but maybe someone can finally explain this to me...

"So-called bitcoin miners expend tremendous amounts of computing power to verify transactions and link them"

If this is true, shouldn't the ability to mine be limited by the computational resources needed to perform these tasks? Instead, it seems people increase computing power with no apparent limit in order to mine, and the "demand" for that power is never met.

The difficulty of the task adjusts periodically, based on the amount of computation provided by all miners.

What matters to an individual is their percentage of the overall mining power, not their computing power in absolute terms.

All the work in Bitcoin mining is going toward making it harder for someone to rewrite the history of Bitcoin transactions (which would allow them to take back sent Bitcoin). More miners means it's harder for any attacker to rewrite the transaction history. The protocol incentivizes people to mine (and simultaneously solves the problem of deciding who to distribute newly-minted Bitcoin to) by distributing the fixed amount of newly-minted Bitcoins between the miners every ten minutes.

Bitcoin's security relies on the true blockchain having more Proof of Work in it than any attacker could create. A Proof of Work value is a proof that you had a computer spend about a certain amount of processing time tied to a specific input value. Someone with one computer can't produce Proof of Works as fast as someone with multiple comparable computers. Someone trying to take-back a Bitcoin transaction and create an alternate blockchain with their transaction removed can't create Proof of Works as fast all of the world's Bitcoin miners working together (unless they have a secret god-tier supercomputer, or somehow convinced most of the world's existing Bitcoin miners to work for them instead).

We mine Bitcoin for the same reason we mine gold, it's extremely difficult/expensive to make gold. Gold has verifiablity at a molecular level. Bitcoin is verifiable at a level of entropy.

Why was the decay curve implemented ad catastrophic halving instead of 10%/yr or adaptive like the block creation rate?

I think Satoshi maybe liked the idea of having these big “events”.. sort of like the olympics? It also helps give everybody a speculative target to try and hold bitcoin until. And one that’s typically far enough away to seem like it might not be priced in but not so far away as to be unreasonable to target. Like four years of high school until graduation, or four years of college..

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