Author Topic: What will happen when bitcoins reward halves to 12.5 BTC?  (Read 18893 times)

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Offline Method-X

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The halving occurs every 210,000 blocks, which is roughly equivalent to four years. Why not simply perform a miniscule adjustment on every block, which occurs roughly every 10 minutes? To be equivalent to the four-year halving, the reward amount would simply be multiplied by a cumulative constant. That constant would be the inverse of the 210000th root of 2, which is 0.99999669930458749782628258129969. The resultant value would need to be rounded down to the nearest satoshi, so that it eventually rounded down to zero.

To make the conversion as equivalent as possible, it could either be done at the midpoint between two halvings (the next one being Nov 2014), or, at the next halving (in Nov 2016), a "half of a halving", i.e., a reduction by the square root of 2 (0.70710678118654752440084436210485) could be performed.

I'm surprised that this was not implemented in the original protocol by Satoshi. It just avoids a big abrupt event that will cause chaos.

Offline biophil

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For those interested in historical curiosities, here's an article by Vitalik in 2012 about the last time the block reward halved:

http://bitcoinmagazine.com/2842/block-reward-halving-a-guide/
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Offline matt608

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Bytemaster, this mining chaos didn't happen at the last bitcoin block reward halving, is there any reason making it more likely this time?

Offline theoretical


Hmm.  If many miners all turn off at the same time, and over 50% of the mining equipment in existence is idle -- might some malicious entity or coalition buy up all that mining equipment at a discount and try a 51% attack?
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Offline bytemaster

The difficulty adjustment will be priced in by the miners who will not invest in hardware that cannot pay back before that date or be profitable after that date.

Many miners will probably keep their rigs going full tilt while it is profitable (like PTS prior to a snapshot)... then when the reward halves miners will have to do the same work for half the reward..... no one has margins that high so "selfish miners" will turn off and allow the "selfless" miners to mine this could result a PTS style difficulty adjustment issue as PTS had the exact same problem after the snapshot.   At todays prices and 0% margins... miners spend $1.4 million per day.   After the adjustment they will have to continue spending $1.4 million per day, but will only earn $700,000.... a perfect 50% reduction in hash power it would take 4 weeks losing $700,000 per day before the difficulty adjusted back to 0% margins.  This will cost the "selfless" miners $20 million dollars at todays prices.... however... the selfish miners will all want *someone else* to pay that $20 million dollars which means they will turn off their miners and instead of the "perfect 50% reduction in hash power" you will see up to 90% reduction in hash power and block times will increase to over an hour.   Then after 2-3 months of a "selfless miner" producing blocks at a loss the difficulty will over-adjust down.  Bitcoin will end up with a mining opportunity more profitable than today... for about 3-4 days as all of the miners turn on again.... then expect another 2-3 months of losses by some "selfless miner".   

These assumptions are based upon experience with PTS and a halving on the mining reward or a 50% drop in share price will start the same sequence of events.... 

Bitcoin will have to hard-fork prior to the difficulty adjustment to use a more continuous adjustment like other POW coins had to (like gravity well).   

These events all assume the following:
Bitcoin price is flat and mining has run into moores law, and margins are thin and primarily electric costs.

If Bitcoin's price runs up faster than new mining hardware can increase the difficulty and squeeze the profits then it could smooth the transition... on the other hand, if bitcoin is in downward trend when this hits then it will make the problem even worse. 

Unless Bitcoin leadership admits they have a problem, lays out a plan at least 6 months in advance, I would watch out.   


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Offline stuartcharles

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Just wanted to get some thoughts on bitcoins 2016 reward halving.

Right now, bitcoin is paying 25 BTC per ~10 minutes in the form of inflation to keep its network secure. When the reward halves to 12.5 BTC in 2016, the price has to increase dramatically to maintain the same level of security. If the price doesn't continue up, hashing is likely to decrease significantly. It's possible that 95% of mining hardware will be rendered obsolete, causing hash rate to plummet and difficulty to readjust.

Seems like a really big unknown. What will happen?

I guess its just economics, i mean, depends what the price of bitcoin, asic's and electricity are. It would be nice to think that at some point in the future there is the possibility of more decentralisation. For example If you imagine a company making asic products that heat your house or water and are available in store (last winter my house was heated by ltc mining, not profitable now). This then stops the farms having an advantage of scale as they waste all that expensive heat.

I say this because its hard to see what's round the corner when everything is already new and experimental. My personal guess is that there will be room for many crypto products all with there own market. No reason why you couldn't have btc, bitshares, maidsafe, etherium and even doge still around and prospering in 10 or 20 years. What will be interesting is their order in market cap and what new products join them.
« Last Edit: September 23, 2014, 04:04:47 pm by stuartcharles »

Offline serejandmyself

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tic toc...
http://bitcoinclock.com/

wow thats cool - i like it. Is there one like this for other coins?

As for the TS - i think the price will go up in short term
btsx - bitsharesrussia


Offline bitsapphire

Just wanted to get some thoughts on bitcoins 2016 reward halving.

Right now, bitcoin is paying 25 BTC per ~10 minutes in the form of inflation to keep its network secure. When the reward halves to 12.5 BTC in 2016, the price has to increase dramatically to maintain the same level of security. If the price doesn't continue up, hashing is likely to decrease significantly. It's possible that 95% of mining hardware will be rendered obsolete, causing hash rate to plummet and difficulty to readjust.

Seems like a really big unknown. What will happen?

Most likely we will see even fewer mining pools. At some point Bitcoin will be left with 3-4 mining pools at most.
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Offline Method-X

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Just wanted to get some thoughts on bitcoins 2016 reward halving.

Right now, bitcoin is paying 25 BTC per ~10 minutes in the form of inflation to keep its network secure. When the reward halves to 12.5 BTC in 2016, the price has to increase dramatically to maintain the same level of security. If the price doesn't continue up, hashing is likely to decrease significantly. It's possible that 95% of mining hardware will be rendered obsolete, causing hash rate to plummet and difficulty to readjust.

Seems like a really big unknown. What will happen?