What is the Bitcoin
Halving, taking place on May 11 at 11pm?
As well articulated in bitcoinhalving.com: The Halving is the predetermined moment when Bitcoin’s block subsidy gets cut in half.
The halving of Bitcoin’s block subsidy occurs every 210 000 blocks (about every four years) and is a key feature of Bitcoin. It is because of the Halving that there is a capped supply of 21 million bitcoin that will ever exist.
The Halving will continue to occur every 210 000 blocks until the block subsidy reaches 1 satoshi — the smallest unit of bitcoin at 0.00000001 BTC.
As Bitcoin’s codebase
parameters currently state, at that point the next block subsidy will
simply drop to zero, and miners will only collect transaction
Details on this upcoming Halving: At block 630 000, the Bitcoin block reward will be cut from 12.5 bitcoin per block to 6.25 bitcoin per block.
Why is it important?
The Halving creates predictable scarcity. One of Bitcoin’s key features is that its supply is hard-capped at 21 million bitcoin. This results in true, predictable scarcity.
There could never even be 21 000,000 00000001 bitcoin without a consensus change to the rules (in fact, there will never even be exactly 21 million bitcoin either, as the actual number of bitcoin that will be released based on Bitcoin’s supply formula is actually 20 999 999.9796).
The mechanism by which this hard cap is created is the block subsidy halving. Therefore, these Halving events are crucial to the predictable scarcity of bitcoin.
Has it happened before?
Yes, twice to date. On November 28 2012, Bitcoin’s block subsidy dropped from 50 BTC per block to 25 BTC per block.
On July 9 2016, Bitcoin’s block subsidy dropped from 25 BTC per block to 12.5 BTC per block. And now on May 11, at around 11.50pm, the block subsidy drops to 6.25 BTC per block
Why should you care?
Bitcoin is one of the very few things you can be sure about. There is no Bitcoin CEO, no government, no permission is required to use it to transfer value and its unconfiscatable. The halving is both a non-event and a huge event at the same time. It’s just another block of transactions that is found and continues on without caring about anyone or anything.
In a world of unimaginable government quantitative easing, the Bitcoin halving is the opposite, it’s quantitative hardening. Tomorrow the inflation rate will be just under two per cent which is less than gold. Bitcoin’s inflation will be under one per cent in 2024.
Many long time bitcoiners follow the work of “Plan B” and his most recent theory, S2FX, based on the Stock to Flow model (S2F) that bitcoin changes it’s properties over time.
Plan B outlines how Bitcoin has moved through the stages as the price grows:
BTC “Proof of concept” (S2F 1.3 and market value $1M)
BTC “Payments” (S2F 3.3 and market value $58M)
BTC “E-Gold” (S2F 10.2 and market value $5.6B)
BTC “Financial asset” (S2F 25.1 and market value $114B)
In 2009 Bitcoin started as an interesting computer science experiment and then in 2011 moved to people making payments then the digital gold phase after the first halving and then a financial asset phase after the second halving in 2016. Each time Bitcoin takes on new properties.
Plan B explains that this is just like how the dollar moved from a physical gold coin where one dollar = 371.25 grains of pure silver = 24 grains of gold. It then went to paper backed by gold to just paper (in 1971) backed by nothing.
Plan B’s model puts the price at around $100 000 by December 2021 and around $288,000 by December 2024. For this huge step change in price, Bitcoin must take on other properties.
I will leave you with the words of Vijay Boyapati (@real_vijay) who when trying to answer the question that the bitcoin halving is priced in believes that during this new cycle Bitcoin will achieve something close to geopolitical significance in monetary terms. The world will
be watching… “very few people correctly anticipate how high the market will go and most will be shocked by the final peak. This is the bull market when Bitcoin achieves geopolitical significance, so everyone will be watching. The feeding frenzy may be like nothing we’ve ever seen”.
At press time the price is around $9000. No-one knows how this price may go from here or whether the price models are reliable. But we do know the certainty of every new block and that 1 btc will always equal 1 btc.
We’ll be back in four years’ time to analyse how the Bitcoin story played out. The internet world may well need Bitcoin more now than at any time of our lives. While one measure will be how many more of you will be comfortable using Bitcoin to save and spend. But another indicator will be how many of you will have needed to use Bitcoin.