Bitcoin Halving Just Occured (opens in new tab)

1. This is all 100% speculative at the moment. Anyone who tells you otherwise is a charlatan. You may make someone money if you're patient, but the point is acquiring a decent stake while it's still affordable on the off (IMO, not 0%) chance that Bitcoin or one of its derivatives become a secondary and then primary spending currency. Realistically, I see a boondoggled attempt by governments to create their own digital currencies with Bitcoin being used primarily as a store of value, a la gold.

2. Technologically, Bitcoin is an intelligent solution to the financial problems created by government mismanagement and greed. It's not perfect, but it's pretty damn creative. With time, most of the major issues seem to be fixable.

3. Also technologically, Bitcoin is not ready for the prime time. The lightning network being implemented at a large scale would be the first warning shot that Bitcoin could see massive, stable use. Until you match transaction volume of Visa, Amex, etc., it's not going to take.

4. The likely timeline this plays out will be loosely correlated with the government's intervention negatively impacting the purchasing power of the dollar (speaking relative to the U.S.). The current situation is actually surprising; I didn't expect anything like this to happen for at least another 2-3 years.

5. Due to the way that humans tend to overestimate change in the short-term, the likely timeline for this to all play out is throughout the 2020's and early 30's, with the mid-to-late 2030's being the "even grandma pays with Bitcoin" moment. I'd say right now is the 97'-98' era for Bitcoin if we're using the internet as a parallel.

6. The current marketing and messaging of Bitcoin is, to be blunt, a freakshow. Painful as it may be, normal folks don't want to be associated with things that seem grimy, shifty, or subversive. The only way to overcome this is to demonstrate that using Bitcoin is easier than the current payment options, or, not having it would mean seeing all of your financial assets rapidly devalue downward toward 0 (which means the U.S. is collapsing and is a whole other bag of chips).

There is not much actual legitimate usage. It is pretty bad for privacy as the whole idea is that the entire transaction history is public and permanent.

Personally I think Bitcoin has great historic value and may become a collector's item similar to how a denarius still has value now, but its properties make it pretty bad for everything you would want a currency to be, except that it's deflationary and well-known. For anything you would want to do with it other than speculate, there is probably a better cryptocurrency (based on the actual tech/design of the currency) or non-crypto tool - it's like the Model T of crypto.

Ease of use for Lightning is not to the point where I think it is good enough for the average user. However, in the early days getting on the Internet was also not easy (remember dialup, PPP and SLIP? I do). I think Lightning is interesting because anyone has the ability to set themselves up as a merchant and receive payments. Right now it is complicated and a bit clunky but it is actually possible.

But out of all the people I know with crypto, they treat them like potions in Skyrim. One day, I'll need all of these different coins. Until then I'll just hold them in my wallet.

So, to answer your question, yes, apparently a lot of people use BTC for conducting actual business.

[1]: https://bitpay.com/blog/bitpay-growth-2017/ [2]: https://news.bitcoin.com/bitpay-reports-processing-over-1-bi...

Also, see valiu.co

Purchasing Bitcoin legally is a pain. If you have an online bank account, most of them do not allow cryptocurrency purchases via debit or credit. Even some traditional banks will not allow cryptocurrency purchases via debit or credit. If you have to go the route of bank transfers, you'll have to pay transfer fees and sit through 1 - 3 days of BTC price fluctuations. If you want to use cash or bank deposits via LocalBitcoins, you'll be paying a significant markup over Bitcoin's trading price, and most sellers have a KYC policy that would allow them to easily steal your identity.

Say you have a credit or debit card that can be used to buy cryptocurrency. Registering with an exchange is a hassle requiring a camera, a phone and multiple forms of photo ID. There is a waiting period before being allowed to purchase cryptocurrency. Exchange fees are high, as are transaction costs. I bought a small amount of BTC and wasn't allowed to transfer it from the exchange for 24 hours because of fraud protection.

I did the math and I would lose more than the 15% discount would have saved me just by buying and transacting with Bitcoin. On top of that, the entire process was unpleasant.

I leave it to you to guess what those things are. BTC is about spending freedom. It and cousins like XMR, etc. are becoming better at it every day.

But over the last few years, bitcoin has gotten _harder_ to use for transactions, as the blockchain has gotten more crowded. In theory, the "lightning network" is fixing that problem, but at this point I usually transact in other cryptocurrencies - there are plenty of them that have stable enough prices for that! But I still own bitcoin as speculation and as a sort of savings account :shrug: It's been a good investment so far

If there was money less trusted than the US dollar that was widely accepted, and US citizens had it, they would choose to spend that money before US dollars.

In countries with very poor fiat currencies, people will hoard USD and spend their local fiat currency where ever they can, only spending their USD when they are forced to, because it's better money.

Governments still demand payment in hard money. Venezuela has been raiding their gold reserves to pay Iran for gasoline https://www.aljazeera.com/ajimpact/maduro-tap-dealmaker-sanc...

Modern portfolio theory says you can’t predict the market; however, you can be absolutely certain people in a group will overreact and over buy or sell an asset group. This is a well studied fact. You can capitalize on this. It’s called volatility harvesting. Look into risk parity portfolios. That said if everyone did this, the hard stance on modern portfolio theory would hold true. At this time humans aren’t capable of acting rationally as a total group.

Bitcoin itself is obviously unsuitable to replace cash (or banks, etc) in general, but I've been fascinated by cryptocurrencies since the David Chaum days, so I like to play with it. Speculating on it is more effort than it's worth, to me.

My USD$25 in bitcoin holdings did require me to check a box on my tax forms this year, though...

You can sell and buy in OpenBazaar [1] or Purse.io [2] for example. In my opinion growing the native cryptocurrency economy and decoupling it from fiat currencies is the most important step to take for their adoption.

[1] https://openbazaar.com/

[2] https://purse.io/

The value of gold, bitcoin, land, etc is simply there is a stable amount of it. The price may jump wildly due to speculation but it's more likely to go up than down over the long term just because the amount of fiat in circulation is constantly increasing.

I was unable to buy the pixel in bitcoin, I wish I had been able to. The fragments left behind I donated to charities online (the FreeBSD foundation)

I saw vendors actually removing Bitcoin support.

There is a distinction between HODLing and merely speculating, although there is overlap in these uses. A speculator is typically somebody who wishes to see their USD holdings increase in the short to mid term as a result of exchanging bitcoin on the market at the right time. A HODLer is somebody who expects their 1BTC to still be 1BTC in 1 year, 4 years, 40 years, ...

There is no implication that there needs to be a financial collapse. There is only the implication that fiat money is guaranteed to be devalued through inflation, which is decided upon by self-interested, unelected, unaccountable men in the shadows, who benefit from being the issuers of new money at the expense of the later recipients of the new money (The Cantillon Effect).

If $1 now is worth more than $1 in 1 year, or 4 years, or 40 years, then anybody of sound mind is not going to save in dollars because their purchasing power when they come to spend the money will not be worth the effort they underwent to earn it. One option for people wishing to save over a long period is to invest in risky enterprises - which is speculation, as much as any investment in bitcoin is. Those other markets are also subject to manipulation, insider-trading and other ill-doings which don't benefit regular savers.

But bitcoin presents an option which is intrinsically different from all of the others: it has an absolute maximum supply which is directly measurable by anybody, which means that its value is subject only to the subjective opinions of market participants trading bitcoin for other commodities and any shadow bankers are absolutely powerless to change this.

The BTC/USD exchange rate is not what is interesting. There are potentially infinite dollars, but there are potentially only a maximum of ~21M bitcoin and no more, ever (but possibly less). There has never been such a hard form of money in history, and even the closest analogue, gold, has been subject to inflation on the discovery of new gold mines, or even through manipulation of the matter (fools gold, coin clipping, etc). Unlike gold, Bitcoin is also easy and cheap to verify for anybody.

It gets more difficult to release new bitcoin with time due to this block subsidy decrease. There is a race to accumulate as much as possible as early as possible under the concern that it will cost you much more later (either in money, or in labour) to obtain the same amount. You're effectively bidding for a share of the potential maximum of 21M, and those shares are getting harder to obtain. To give a historical account: if you had purchased 1 BTC in dollars 10 years ago, it would've only cost you 1/8000 the amount now. Translate that into labour, and it means you'd be working for several months to years to obtain the same share which could've been obtained for 5 minutes of work if you'd done it sooner.

There's still ample possibility that Bitcoin could see 10x, 100x or even 1000x gains over the next years/decades. If you hold fiat money in a bank account, you are risking missing out on all of that. Are you willing to take such risks? How is holding dollars no less of a risk than holding bitcoin?

Imagine if a publicly traded company announced that in 1 years time, they would buy back half of their outstanding shares (not a great analogy but its the best I can think of). What would happen to the stock price?

All securities prices in publicly traded markets are essentially priced as discounted cash flows over the next 20-30 years. The current price reflects all available public information about those cash flows.

I'm not saying efficient markets is 100% true all of the time, of course the world demonstrates that it isn't, but the level of disbelief you have to have in the hypothesis to believe that a well-known public event affecting Bitcoin will result in a 3x price increase is lunacy, IMO.

Think of it like a differential equation where a steady state is changed... like a spring that has been held in a certain position is released. There will be a shock as the system seeks to find a new equilibrium.

The fact that the system has been shocked means that there is some predictable craziness that will happen soon. It is basically guaranteed fun no matter how it turns out.

I've been following bitcoin a long time, and was excited for the halving. But I'd never heard of the model you described and could care less about it.

After all the last halving was in July 9 2016. Since then the production has been reasonably constant while the price has been a complete rollercoaster.

With logarithmic scales and big enough error bars you can fit anything into anything.

>If you're wondering why your friends who are into cryptocurrency are in a tizzy

Being into cryptocurrency is reason enough to be honest.

No, it predicts it will be at $30k at the end of this year, and $100k this time next year [0]. I'm pretty comfortable saying that no, it wont. If I though there was a reasonable, legitimate way to trade against that outcome occuring, I absolutely would. For reference, in the past year, BTC has increased in price by ~$1450 or 20% - getting to $100k would be over 1000% increase.

[0] https://digitalik.net/btc/

My own prediction is to observe that the price has been in a wide band around $10k for the past year, so will continue to hover around that, with gradual upslopes and sudden dropoffs of 5-30% for no apparent reason that cannot easily be post-hoc linked to events.

You have my curiosity. What is the prediction that Stock-To-Flow made about the effect of the halving?

2) I'm forced to cut my security budget in half.

3) ??????

4) I'm now twice as secure.

I'm not wondering that, because none of my friends are in a tizzy. Are your friends in a tizzy? Am I just outside the social connections to the tizzy club?

https://m.youtube.com/watch?v=64R918K-3L8

With the extreme uncertainty globally, this model cannot be reliable.

https://share.cryptowat.ch/charts/bqsr58eein8u9uevh370-krake...

https://twitter.com/cryptowat_ch/status/1253335480256483330

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?

"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 Times 03/Jan/2009 Chancellor on brink of second bailout for banks

Back then it was a response to the 2008/9 financial crisis, which is what makes this new message relevant.

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

On a secondary note, who can claim that it is a good thing that money can't be printed if necessary? The crisis of 2008 was a liquidity crisis, without the ability to print money it could've turned into a great depression. Making the money supply fixed is just throwing out one tool out of the toolbox.

This habit of disproportionately rewarding early adopters is a universal feature of our economy and doesn't only apply to cryptocurrencies. The reason why it's like this is simply because it's extremely difficult to get any project or company off the ground; the risk of failure for an early adopter is ridiculously high so rewards also need to be ridiculously high to justify those risks.

This is because most economic activity today is focused on seeking rents and building moats; so this has made the environment extremely adverse for newcomers; it lowered their probability of success and forced early adopter payoffs to skyrocket. We live in an age where the moats are so wide that that even offering customers a solution which is 10x better isn't going to cut it anymore in terms of being able to turn any profit.

One might think that cryptocurrency would be immune to this; after all, the entire point of the blockchain movement was to fix such kinds of socio-economic problems - But having worked in the space for several years, I can say with confidence that incumbents in the cryptocurrency space have become part of the same problem which they were originally claiming to solve. Development in the space is slow, inefficient, lacks a clear vision and the incumbents of the cryptocurrency space lack any incentives to give newcomers a fighting chance. They will happily let the most promising new projects drown in the noise of popular mediocrity.

The hypocrisy of it all is unmistakable. I've seen the ugliest side of human nature in this industry. That said I'm still cautiously optimistic but it's clear that something has to change at a social level in order to move forward.

We could call the entity that adjusts the rate of issue a "central bank" and they could perform this "inflation targeting" to keep the value of the currency stable through economic shocks.

Atleast what the designer intended/predicted if I remember correctly, is for the reward value over time to be the same. This is of course not backed by mathematical equation of sort. I would way super early mining is more similar to being the first employee of a startup that pays you in equity only.

Well, it's a great way to get people to be invested in your new cryptocurrency.

The irony is that no matter what you do there will only ever be a finite supply of any currency, fiat or otherwise. It's a finite universe, so "finite supply" is inherently imposed by the laws of physics.

> practically all cryptocurrencies subscribe to the notion that early miners must receive greater rewards

That's the real objective. Like all startups, cryptocurrencies want to encourage early adoption by, among other things, FOMO. If there is no benefit to being an early adopter, no one will adopt early, and if no one adopts early, you will never get to critical mass.

The reason why is that electricity for mining is priced in national currency, so interest in mining bitcoins depends on a miners future expectation of the value of bitcoin price in national currency when they sell the bitcoins to pay the electricity bill. The current wisdom is that the halvening decreases the amount of bitcoin that miners receive while increasing the USD value of bitcoin because it decreases market supply and the perception of market supply.

If the price of Bitcoin now doubles presumably no miners will be turning off their machines. If it doesn't double, some fraction of all mining setups just became unprofitable.

Fees are still not near dominating the rewards so we do expect to see miner revenue drop due to this.

It's a chaotic system by design which makes it really hard to predict what will happen in the long run.

They haven't been correlated to block reward AFAIK.

Perhaps this is glib, but it's worth remembering that bitcoin isn't a rational market. At no point in its history has the market reacted rationally to any event.

It only appears rational in hindsight, if at all. But "rational" implies a causal link between an explanation and a subsequent event. Those explanations almost never turn out to be true.

BitCoin is gambling where big players intentionally alter the price and small players hope to sap some $$$ like fleas on a dog.

Rationality, for economists, simply means that when you make a choice, you will choose the thing you like best.¹ This is very different from the way we normally think about rationality. Usually when we talk about rationality we use it to mean sensible, or reasonable. To economists—as long as you’re doing what you want given your situation, you’re acting rationally.

[1]read.hipporeads.com/what-an-economist-means-by-rationality/

Yes, current prices include anticipated future events (or at least speculation on those events, as well as anticipated behavior of market participants based on those events, yada yada), to an extent. What prices can't anticipate is the behavior of market participants at any point in the future, much of which will be irrational; or the events in future history that may or may not trigger that behavior.

Yes, there is alpha to be gained based on data collection/processing -- things like news, weather, twitter, satellite images of traffic or parking lots, etc. The more you know and can effectively analyze that other market participants don't know or can't effectively analyze, the better. But no one really knows the future, only what traders are statistically likely to do in the near future based on current events.

Bananas are bad for you! Bananas suck! Bananas are a scam!

You're going to have to elaborate on this. I don't understand how the adjustment of future mining rewards has anything to do with past "trespasses."

>it also gives Bitcoin a nice bump of attention in the media

It gives bitcoin negative media attention, because people on the outside will read the headline as "Bitcoin's value is cut in half," which is not the case.

the top comment on the 2012 one was about someone seriously concerned about the 2.8GB blockchain download to get started, and a debate about the scalability of bitcoin.

since then:

- light clients have been created. no mobile or desktop user worries about blocks, keeping only references to a few prior blocks.

- merchant services which are full nodes use pruned clients, which mean their servers only use 25gb or so. (while the blockchain is 10 times larger)

- compression of transactions have improved, so each tx takes up less space on the blockchain.

- validation time of the blockchain is much faster, even if you have to download the whole thing from scratch

- there is still a large and growing community of actually full nodes that do invest in the appropriate hardware for decentralization.

- and mining full nodes and their pools have fierce competition to keep their constituent miners, continually distributing transaction validation even if the pool operator is just a centralized single full node.

Some may be speculating that miners dropping out is bad for bitcoin because it reduces the security of the network and may give people weak hands if they're concerned that their money may not be as safe as previously assumed. Miners dropping out of the race would also release more mining hardware onto the markets at discounted prices, and some of it may go towards attempting to attack bitcoin. However, if you do the sums and work out how much it would cost to attempt and sustain such an attack, and how much can be gained from it, you quickly realize that such an attack would never be attempted for monetary gain - it is in the miner's best interest to play by the rules. The only other motive for attack is to cause temporary denial-of-service, at the expense of the miner, but this could only plausibly be conducted by a nation state due to the amount of work done in Bitcoin.

during some periods of time the price falls and it takes longer for all of that to happen, with existing miners being slowly replaced by more well capitalized miners

Miners will want to cover the cost of mining, and to achieve that they will want to sell coins for higher price than they were selling it before for.

I prefer calling it a distributed mechanism for emergent consensus. Consensus is not achieved explicitly - there is no election or fixed moment when consensus occurs. Instead, consensus is an emergent product of the asynchronous interaction of thousands of independent nodes, all following protocol rules.

Early settlers are incentivized to grab large swathes of land quickly and cheaply, to get the system bootstrapped. Later settlers have to fight over smaller tracts of land, because after all the land is finite (you eventually reach the ocean). However, the land is also nicely divisible into smaller and smaller sub-plots, so units can be adjusted as needed.

The rules by which this "westward expansion" are governed are written into the Bitcoin protocol. But unlike land and the ocean which are natural facts for the most part that we take for granted a priori, with Bitcoin the "border"/limit here is also defined as a theoretical construct (and hence, could theoretically be changed, but this would be a hard fork and people would have to reevaluate the value of a new network with a new set of boundaries/rules).

I guess Satoshi thought that would be a good schedule when the code was written. It must have been hard to see how the future would pan out.

in a nutshell: miners group transactions into block (ie mine). whoever manages to form a block (you need to solve a computationally expensive problem that has the transactions you want to include as inputs) get a reward. up until today the reward was 12.5 bitcoins. Starting today it's half of that 6.25.

speculations about what this means and where BTC is going follow from this.