Coinbase transaction message in last mined block with 12.5 BTC subsidy: "NYTimes 09/Apr/2020 With $2.3T Injection, Fed's Plan Far Exceeds 2008 Rescue"

https://blockchair.com/bitcoin/block/629999

If you're wondering why your friends who are into cryptocurrency are in a tizzy, it's related to a model called "Stock-To-Flow" that attempts to post-facto explain the price of Bitcoin (and other liquid assets, like gold) in terms of the rate of production.

Proposed by PlanB [1] it is a source of constant derision/hope/skepticism/dismissal by the Bitcoin community, and the halving of the reward gives it its first non-backtested novel prediction.

Roughly it predicts [2] that the price will settle into a band around 30,000 USD sometime next year.

[1] https://twitter.com/100trillionUSD

[2] https://cointelegraph.com/news/bitcoin-halving-will-be-make-...

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.

HN discussions from past halvings:

2012 - https://news.ycombinator.com/item?id=4842947

2016 - https://news.ycombinator.com/item?id=12061618

Does anybody actually use bitcoin? And by use I mean transact actual business, and not just speculate. You know, buying and selling real world goods and services.

Or is it like gold reserves, people just hoard these digital numbers until they are ready to cash out.

I'm really curious for the hoarders, if they're doing it as a hedge against global financial collapse, how exactly do they expect to redeem their bitcoin for anything tangible?

These are serious questions, I've given bitcoin only a minimum of thought. It seems a great way to move value out of a closed economy like China, or for drug dealers to move cash across borders, but who else uses it?

For anyone interested in the code behind the halving, I had some fun dissecting the GetBlockSubsidy() function that takes care of halving & ending of block subsidy [1].

It continues to amaze me that I struggle to set up a 5-node database cluster without one going out-of-sync or split-braining every few weeks, yet the bitcoin network manages to keep thousands of miners in-sync. This has to be the best example of eventual consistency in a production network.

[1] https://ma.ttias.be/dissecting-code-bitcoin-halving/

One of Bitcoin's main goals is to fix the unpredictable and arbitrary emission in fiat currencies. But its finite supply, said to be modeled after Gold's, is questionable.

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, and avoid lengthening confirmation times to maintain security against doublespending [2].

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...

[2] https://www.coindesk.com/the-halving-exposes-bitcoin-to-51-a...

A critical relevant fact is missing to help explain this. It screws up currency analogies, and that may be why people have asked for clarification.

Bitcoin (BTC) is classed by the US Federal Gov't (IRS) as property, not currency.

That wasn't some kind of mistake or tax technicality on the IRS' part - a lot of analysis went into this in 2013, along with DHS and FinCEN. This is the definition for BTC in the US.

That means what happened today could be described as: The first and oldest decentralized, distributed, cryptographically-secured record of digital property ownership (Bitcoin as a network) is producing cryptographic keys (the property, BTC) at half the rate it was yesterday. There is now less of the digital property (BTC) being created by the network daily, and this is due to an artificial scarcity strategy built into the Bitcoin source.

Hope that helps

So, pre halvening -- the average block reward was worth about $100,000. Fees totaled about $5,000.

I don't really understand the economics of this, but it seems there are a few possible outcomes:

A) Prices double because miners refuse to sell at a price that gives them less than $100k a block and demand for coins is inelastic.

B) Fees go up 10x because miners now need to make $50k in transaction fees instead of $5k per block to make up for the lower block reward, and demand for transactions in inelastic.

C) Difficulty and prices drop because neither transaction demand nor coin demand is inelastic, and miners will begin turning off rigs that are no longer profitable at $50k per block.

D) Some combination of the above.

BitCoin is such a big disappointment. From a global way of making micropayments it became a global multi level marketing pump and dump scheme. The true believers always told how BitCoin will be the one true saviour when shit hits the fan -- well, we are during a pandemic not seen in 100 years and BitCoin is basically irrelevant.

There is no BitCoin economy, only people watching the BTCUSD sticker price because only the real economy matters.

I'm also willing to bet the network resilience is not as high as techno folks want to believe and if some governments want it shutdown it will be pretty close to shut down and the FX rate will go towards $0.

In many ways BitCoin is not an anti-globalist or anti-anything response. It is a product that exists due to globalization. And the high prices are a result of some economic stability and prosperity that allowed the population to play with shiny things. The coming depression will put an end to such trivialities.

For complete Bitcoin newbies, it is perhaps worth noting that while newsworthy, this event is not like an earthquake or a stock market crash as it does not come as a surprise to anyone:

This event was (modulo + or - a month) pre-determined from the very first day bitcoin was launched (and so is the next halvening and the one after that).

The page lists "Coinbase Transaction" in the quantity 7.15968084 BTC.

The coinbase transaction is the first one listed in the block. It has no explicit payer, and can be valued up to/including the sum of:

- the block's aggregate transaction fees

- the block subsidy (6.25 BTC starting with block 630,000 today)

There's some technically detailed information on coinbase transaction/money stock edge cases that have occurred over the years here:

https://bitcoin.stackexchange.com/a/38998

Also see this discussion of a jaw-dropping miscalculation of the block subsidy (even though dated April 1, it's for real):

https://github.com/bitcoin/bips/blob/master/bip-0042.mediawi...

Why have a “halving” every four years, you may ask?

Having a periodic “The Halvening” ritual every four years allows Bitcoiners to reconcile and forgive each other’s trespasses for one, it also gives Bitcoin a nice bump of attention in the media and on social media, and finally it gives the Bitcoin High Priests an opportunity during the ritual to re-iterate the Bitcoin Commandments (eg. “Thou shall worship fixed monetary supply” and “thou shall not worship other consensus rules”). All this strengthens the community, and thus, the consensus, and a strong consensus is part of the main selling point: to get filthy rich.

I don't understand why this is causing almost any movement in the markets at all. It's a predictable event, so everyone's position should already take it into account. Why would this introduce any volatility?

Will this likely increase typical transaction fees to make up for block reward?

"Bitcoin is an experimental digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network."

Seems like an successful experiment to me. I am excited to see what next gen tech in this space will bring.

Is there speculation regarding what miners will do instead of mining Bitcoin? For example, mining another cryptocurrency instead of Bitcoin? This would seem to have implications for the mining power for these altcoins, and perhaps implications for their prices as a result. I haven't seen any discussion about this.

So what happened? Did the price go up or down?

Bitcoin fans claims the price should go up. Conventional financial wisdom is that the price of something contains expected future events, so the price should remain the same.

Regarding a potential impact on the bitcoin price, consider that — assuming miners sell their mined bitcoins for dollars to pay for hardware and electricity — now only 6.25 BTC per 10 minutes will be sold into the market because of the halving. That’s a reduction in the amount of bitcoin sold into the market every 24 hours of roughly $8m.

I believe this is the theory behind expecting a price increase. Whether or not it materializes time will tell.

Anyone have any news on if any major miners have said if they are going to be switching away from BTC for the time being?

As of 10 blocks past halving it doesn't look like total hash power has decreased much.

It'll certainly be interesting to see if mining power drops off in the coming month.

Long term I'd love to follow something that simply warns when there's enough rentable or assumed dark mining power that 51% attacks on bitcoin mainchain is a realistic threat.

Looks like it's a non-event.

Ethereum launching their "ETH 2.0" and transitioning to staking will be a bigger event in the crypto space later this summer!

Oh great, another site that servers machine translation of content. So I get "brownie" instead of "hash", that makes page so easier to understand. The only worse offender is the Google Play store, the autotranslated description actively prevents me from understanding app description.

for all the sceptics here, a good intro to bitcoin and money[1]

https://medium.com/@vijayboyapati/the-bullish-case-for-bitco...

The crusade will continue on. Many folks whom have bought into BTC at this point know very little about its technology. Not sure if that's a good or a bad thing...

What's the advantage of reducing it by 50% each year versus 30% every 6 months (51% a year)? Seems like the stepping function would be less severe.

Bitcoin now has a lower inflation rate than gold. It is likely that the main seller of Bitcoin from here on out will no longer be miners but exchanges.

TLDR: mining rewards should pretty much have no effect on BTC price

We're years into bitcoin and I feel that people still don't understand the basic premise that with an adjusting difficulty it literally doesn't matter how many people want to mine. Difficulty will adjust to about the break even point for miners that can run at scale (likely in a place with cheap electricity).

The price of bitcoin is still based on supply and demand for bitcoin. Whatever THAT clearing price is will determine whether or not it is profitable to mine. If it is not profitable to mine, miners will drop out until the difficulty level falls enough that it becomes profitable again.

Miners will now receive 6.25 bitcoins per block.

Where would the climate crisis be if we diverted all the energy spent on Bitcoin mining into carbon sequestration?

I have no idea what that means, and the page itself is a ledger, not anything to explain what that means.

Would it mean there would be less interest in mining bitcoin (and thus 'wasting' electricity)?

the fact that I can't see a straight answer to the general question about 'what does this mean simply' or attempt at some clarity that isn't followed by some argument or pitch or slag off of something response is ridiculous and sums up the world of bitcoin

What is the current rate of growth of bitcoin purchase transactions, preferable time series history?

Interesting to see what will happen to Bitcoin which slashed the supply in half exactly at a time when major currencies have fully open the supply floodgates because of Covid-19.

If the law of supply of demand carries any predictive power, BTC should see a compounded rise.

Btc breaks 35k by next halving (not maintains). Documenting this here so I remember to check back when I see the next halving up on HN board in 2024.

Edit: Feel free to reply with your guesses (good as mine) for a good laugh in 4 years

Could someone explain, in English, why this is a big deal?

Can someone explain to the uninitiated what halving is?

ELI5 ?

There is a quite a bit of incorrect economic analysis in this thread and elsewhere. In a rational market the halving should have no impact on the price of Bitcoin because it's a well known event that should have already been priced in.

It's totally possible that the price might go up, but the reason for that rise would be the irrational behavior of other market participants and people should acknowledge that.

Is is safe to invest in bitcoin now?

Predicted by Luboš: https://motls.blogspot.com/2020/05/may-11th-12th-could-be-gr...