Bitcoin halves in less than 10 days, will the history of halving the rise repeat itself?
Source: Coindesk
Block chain institute
Less than 10 days after bitcoin halved, it's time to talk seriously about the impact. This is the first time that more than 99% of people in the bitcoin community have seen bitcoin cut in half. So what is a half bitcoin? What is the effect on the price? What does it mean for miners and blockchain players?
In this article, we will discuss these issues together.
& have spent One, what is half bitcoin? & have spent
Coming back from the May Day holiday, in a week's time, bitcoin will halve for the third time. To be exact, after 1,453 blocks, the reward for bitcoin miners to create blocks will be halved, from 12.5 to 6.25. Halving bitcoin is short for halving the number of bitcoin block rewards.
In the bitcoin network, bitcoin enters the circulation field in the form of block rewards, and miners are encouraged by block rewards to maintain expensive computing equipment and maintain the safe operation of bitcoin. Every 210,000 blocks, or about every four years, the total amount of bitcoin rewards miners receive is cut in half.
The graph below, showing the relationship between bitcoin halving and the height of the block, can help us understand this process more intuitively.
The halving of bitcoin is not the first time it has happened. In 2009, 50 bitcoins were awarded. The first time bitcoin halved was on November 28, 2012. Four years later, a second halving took place on July 9, 2016, with the block award reduced from 25 bitcoins to & NBSP; 12.5 & have spent A. The halving in May 2020 is the third halving in bitcoin's history.
Bitcoin halved without any technical changes. Like a precision machine, the bitcoin network is set to halve the block reward for every 210,000 blocks it generates. Halving in four years is the minting cycle of bitcoin.
But the halving of bitcoin has generated more attention than ever before.
Two, why bitcoin halved?
Who designed the halving mechanism for bitcoin? And why?
Satoshi nakamoto created bitcoin and disappeared about two years after he released the software to the world. 'I'm going to do something else,' Mr. Nakamoto wrote in an email to software engineer Mike Hearn on April 23, 2011. Since then, the world has no news of satoshi nakamoto. There is no clear explanation from satoshi nakamoto (he or they) as to why this particular formula was chosen to set the bitcoin coin cycle.
But we can learn a thing or two about the mysterious figure through some of his early emails.
Shortly after the release of the bitcoin white paper, Mr. Nakamoto summarized a variety of possible monetary policies, or mechanisms, to offer miners block rewards. Under what circumstances may deflation occur and under what circumstances may inflation occur? These questions are on his mind.
It was impossible for Mr. Nakamoto to know how many people would use the new electronic currency, or even whether anyone would. Nor did it elaborate on why the current particular approach was chosen. "the initial currency allocation had to be done in some way, and the best formula for that seems to be a fixed issuance rate."
In most currencies issued by countries, central Banks such as the federal reserve can increase or eliminate the amount of dollars in circulation in some way. If the economy falters, for example, the fed could boost liquidity and encourage lending by buying bank securities. In addition, if the fed wants to pull dollars out of the economy, it can sell securities from its account and get dollars back.
Bitcoin is very different: it has a fixed amount and is issued in a special way.
Before halving in 2016, Blockchain.com, a cryptocurrency wallet company, wrote in an article:
"Unlike most currencies we are familiar with, such as the us dollar or the euro, bitcoin is designed to have a fixed supply and a monetary policy timetable in place. There will never be more than 21 million bitcoins. This predetermined number creates scarcity, and it is this scarcity and availability that greatly affects their market value."
Another unique feature of bitcoin is that Mr. Nakamoto USES code to set block rewards to be regressive: they decrease over time.
This is another difference between bitcoin and the modern financial system. In stark contrast to the halving of bitcoin's block reward, the supply of dollars has roughly quadrupled since 2000, the norm in the modern financial system.
The clue that Mr. Nakamoto left behind was that he created bitcoin for political reasons. In the bitcoin creation section, satoshi nakamoto wrote a headline from The Times:
"The Times 03/Jan/2009 Chancellor on brink of second bailout for Banks."
On January 3rd the chancellor of the exchequer was on the verge of implementing a second bail-out for Banks.
Many interpreted it as a sign of nakamoto's political beliefs and goals. If widely adopted, bitcoin could reduce the power of Banks and governments over monetary policy, including bailing out troubled institutions. As block reward shows, no central entity can create bitcoin outside of a strict timeline.
Why do people pay so much attention to halving?
When the first bitcoin block reward was halved in 2012, the price was $12.31, according to the institute's records. When it halved for the second time in 2016, it was $650.63.
The halving grabbed so much attention mainly because many thought it would lead to higher prices. The main reason most people care about bitcoin halving is that it is associated with the possibility of sudden wealth.
A common view is: what does it mean if demand for bitcoins stays the same, and because fewer bitcoins are being produced by bitcoin miners, fewer bitcoins are being sold, and so the supply of bitcoins entering the exchange suddenly drops? For many, that means they expect bitcoin prices to rise.
As a result, the halving of bitcoin has sparked a heated debate about the trend in the bitcoin market.
But is it?
For some die-hard bitcoin fans, the focus is more important than the price.
Andreas Antonopoulos, author of "mastering bitcoin," is one of bitcoin's most famous evangelists. As always, Andreas is not concerned about the relationship between bitcoin halving and price expectations. In his view, we simply can't predict prices, and making such predictions is as pointless as counting the leaves in an astrological chart. Rather than short-term price fluctuations, he is more concerned about the long-term impact on the bitcoin system of the periodic halving of bitcoin block rewards.
The bitcoin network has no leader, no centralized leader, and block rewards are critical to maintaining the security of the bitcoin network. Will bitcoin miners be able to keep their COINS safe without a reward for getting out of the network over the next few decades, as the reward for getting out of the network dwindled to zero?
What is the effect of halving the price?
I know this problem must be of concern to many people. But honestly, all I can tell you is that we just don't know what's going to happen. No one knows.
When it halved in 2012, the bitcoin community had no idea what the sudden drop in block rewards would do to the web. Soon after halving, prices began to rise.
2016 & have spent A second halving in 2007 is expected, as is a third halving now in the offing. CoinDesk has been following the event on its live blog, and Blockchain.com has posted a "countdown." Each bitcoin halving has spurred fevered speculation about its price.
On July 16, 2016, the day of the second halving, the price of bitcoin fell 10% to $610, but then soared back to its previous position. There is little evidence that the sudden drop in bitcoin's mintage has had a long-term impact on prices.
While the direct impact on the price of bitcoin was modest, the market did rise in the year after the second halving. Some argue that the rise is the delayed result of bitcoin halving in value. The theory holds that when the supply of bitcoins declines, demand for them stays constant, driving up prices. If this theory is correct, then we may observe similar price increases after future halving, including this month's halving.
Stock-to-flow (Stock/circulation model), or S2F model for short, was proposed by PlanB, a foreign blogger. It USES indicators of precious metal commodities such as gold and silver as reference to measure the ratio between the circulation of bitcoin and the new inflow into the market. According to PlanB, the price of bitcoin will reach $288,000 in 2024. Analysts who believe in this model believe that the ratio of bitcoin's stock to the amount in circulation (the S2F ratio) increases as the supply of bitcoins decreases and the price of bitcoins rises after the bitcoin is halved.
Of course, some people disagree. In their view, given the predictability of the bitcoin halving timeline, the impact of the halving event had already been priced in and there were no waves. Traders have long known that bitcoin block rewards will be reduced, giving them plenty of time to prepare.
It is possible that if enough people knew about the halving in advance, they would buy bitcoin in anticipation, pushing up the price before, not after, the halving.
History does not repeat itself
In a recent report, CryptoCompare, a leading provider of data services for the digital asset market, offered some original data and insights on bitcoin's halving.
& have spent Google searches for "bitcoin halved" surged
The chart below shows how searches for the term compare to the price of bitcoin over the past five years. We can see that the number of searches recently has significantly surpassed the number of searches in July 2016, when bitcoin halved for the second time, indicating a growing interest in the event.
So does this mean that the surge in attention will lead to a bitcoin boom? In CryptoCompare's view, history does not always repeat itself. Today's 2020 market, bigger and more mature, may not repeat the outcome. The cryptocurrency market in 2020 is very different from the cryptocurrency market in 2016.
Daily trading volumes on the spot bitcoin exchange rarely exceeded $1bn in 2016, peaking at nearly $1.5bn in about two weeks before halving. By comparison, daily bitcoin transactions in 2020 were often 10 times that. Daily spot trading volume on top exchanges reached $21.6 billion on March 13.
In the previous halving cycle, miners' selling was the main factor in determining selling pressure in the bitcoin market, and miners had a much greater impact on bitcoin prices in 2016, CryptoCompare said in its analysis.
Four years later, however, with spot and derivatives trading volumes far higher than expected and more market participants, the amount of bitcoins sold by miners has halved, with less impact on total selling pressure in the market. So expect bitcoin to have less impact in the months after it halved in May, and therefore less chance of a price spike.
In short, as the bitcoin market grows and there are so many players, miners selling bitcoins have less influence on market price movements.
At the end of the analysis, CryptoCompare pointed out:
While supply is dwindling in theory and the S2F model might expect prices to shoot up, the reality is much more complicated. The larger and wider market for cryptocurrencies, and the maturity of the spot and derivatives markets, means that the impact of miners selling is simply not that big. The impact of Covid-19 novel coronavirus and stock market volatility on the price of bitcoin may be more decisive than halving itself.
What does halving mean for miners?
Miners digging mines keep the bitcoin network running; Miners dig not for the good of the public, but for the good: it costs a lot of money to run these power-hungry computing devices, and the bitcoin block reward provides an incentive for miners.
But when the bitcoin block reward is halved, the earnings of bitcoin miners will also be affected. In addition to block rewards, the transaction fees that users pay each time they send a transaction are another source of money for miners. Block rewards go down periodically and eventually go to zero; Fees are expected to be a more important source of pay for miners. But, I mean, in the distant future, when block rewards are no longer attractive enough for miners, will fees alone attract enough miners to keep the bitcoin network safe? That's a question that still needs to be answered by researchers.
Satoshi nakamoto once wrote:
"In a few decades, when block rewards become too small, transaction fees will be the main reward for mining nodes. "I believe that in 20 years, either there will be a lot of trading or there will be no trading."
Miners are not created equal. Halving that leaves some miners at greater risk than others. Block rewards are cut in half, and mining requires a lot of power and dedicated computing equipment, so some bitcoin miners will have to shut down their machines. In a video interview earlier this year, Andreas Antonopoulos, a bitcoin evangelist, explained why halving the price would keep some miners out.
Andreas points out in the video that if everyone was running exactly the same ASIC and buying electricity at exactly the same price, everyone's profit margins would fall by half when subsidies were halved. But the truth is that margins at smaller and larger mines have not fallen in tandem. Economies of scale have an impact, with large mines able to buy large amounts of ASIC equipment at lower prices and to locate mines near power plants with lower electricity prices.
From this perspective, larger mines are likely to be more profitable than smaller ones. But there are other problems for big mines, too. For example, when new, more efficient ASIC miners come along, you have to make a big upgrade to the infrastructure of your operations. When mismanaged fires and floods occur, more mines are destroyed.
But in his view, it has less to do with the size of the pool and more to do with the health of its operations. There are a number of factors that can work against vulnerable miners, because halving bitcoin reduces mining incentives, making it harder for miners to make a profit.
So what happens when you cut it in half is that the least efficient miners go out. Their ASIC equipment has lower block yields and higher electricity prices, making them less competitive and less profitable than miners with advanced ASIC mining equipment or lower electricity prices.
Seven, write at the end
I hope this article has given you some insight into bitcoin halving. Opinions vary as to the impact of bitcoin on prices. Let's face it, we just can't predict the price, we just look for the price attribution later. Whether using S2F model, or various indicators, models, we can do the best guess, and guess size.
But it is also a blessing to see up close the iconic event of bitcoin halving, to observe the dynamics of one of the greatest inventions of the 21st century, to see the deep thinking of satoshi nakamoto on the monetary and financial mechanisms behind the halving, and to see the ripples that bitcoin has created for the world.
Think of the halving of bitcoin as an anniversary, perhaps a close encounter that will make you look back years later on a night in mid-may 2020 and think:
Bitcoin, never regret to have known. & have spent
Original: www.coindesk.com/bitcoin-halving-explainer
https://mp.weixin.qq.com/s/2b4CH1HT8eiVsTcuOfsWhg
& have spent
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