Bitcoin Halving 2024: How It's Different This Time, Myths Debunked, Bitcoin Bugs, and More

Summary

In this video, Andreas Antonopoulos discusses the Bitcoin halving, a significant event that occurs every 210,000 blocks, reducing the block reward for miners by half. He explains the technical aspects, such as the block subsidy reduction and the binary division process, and dispels myths around the halving's impact on Bitcoin's price and network health. Antonopoulos also addresses common concerns like the 'death spiral' theory and the potential for price increases, highlighting the variability among miners and the market's delayed response to such events.

Takeaways

• 🔑 The Bitcoin halving is a regular event that occurs every 210,000 blocks, reducing the block subsidy miners receive by half.
• 📈 The first halving reduced the block reward from 50 to 25 Bitcoin, and subsequent halvings further decreased the reward.
• 💻 Bitcoin's smallest unit is the Satoshi (one hundred millionth of a Bitcoin), and rewards are calculated in whole Satoshis.
• 🛑 The halving process is a binary division, achieved by shifting the reward value's binary digits to the right.
• 🚫 Fractions of a Satoshi do not exist; the smallest unit is a whole Satoshi, except in the Lightning Network where it rounds up to the nearest whole Satoshi.
• 🔄 After 64 halvings, the reward will effectively reach zero, as the binary shift will result in a wrap-around effect, which was corrected in the Bitcoin protocol to avoid.
• 📉 The 'death spiral' myth suggests that halving will make mining unprofitable, causing miners to quit and the network to halt, but this has been debunked as miners have diverse circumstances.
• 📈 A common economic theory suggests that if supply is halved and demand remains constant, the price should double to rebalance the market.
• 🕒 The timing of the halving can vary due to changes in difficulty and hash rate, but estimates converge as the event approaches.
• ⏲️ The actual block interval is slightly less than 10 minutes due to how the Bitcoin protocol calculates the time between blocks.
• 🧐 Andreas Antonopoulos predicts that at the moment of the halving, there will be no significant immediate changes, contrary to media speculation.

Q & A

What is the Bitcoin halving?

The Bitcoin halving is a regularly scheduled event that occurs every 210,000 blocks on the Bitcoin blockchain. It reduces the block subsidy, which is part of the reward that miners earn by mining a block of Bitcoin, by half.

How often does the Bitcoin halving occur?

The Bitcoin halving occurs approximately every four years, as it takes about that long to mine 210,000 blocks.

What was the block reward at the time of Bitcoin's Genesis?

At the time of Bitcoin's Genesis, the block reward was 50 new Bitcoin per block mined.

What is the significance of the block subsidy reduction during the halving?

The block subsidy reduction during the halving is significant because it decreases the rate at which new Bitcoin is created, which can impact the supply dynamics and potentially the value of Bitcoin.

How does the halving process work in terms of Bitcoin's unit of measurement?

The halving process is not a division in the traditional sense but a binary division that happens by shifting the binary digits to the right, effectively halving the reward.

What is the smallest unit of Bitcoin in the system?

The smallest unit of Bitcoin in the system is the Satoshi, with 1 Bitcoin being equivalent to 100 million Satoshis.

What happens when the block reward reaches one Satoshi during a halving?

When the block reward reaches one Satoshi and is halved, it does not become a fraction of a Satoshi. Instead, it wraps around to the maximum number that can be encoded as a binary number, but a patch in the Bitcoin software prevents this from causing an undesirable increase in the reward.

What is the 'death spiral' theory associated with Bitcoin halving?

The 'death spiral' theory suggests that when the block reward is halved, miners will become unprofitable and stop mining, leading to a decrease in the network's hash rate and potentially grinding the network to a halt. However, this theory is generally dismissed due to the diversity among miners and the network's ability to adjust.

Why is the 'death spiral' theory unlikely to occur during the Bitcoin halving?

The 'death spiral' theory is unlikely to occur because miners operate under a variety of conditions and not all will become unprofitable at the same time. Additionally, the network adjusts the mining difficulty every 2016 blocks, which helps maintain the 10-minute block time even if the hash rate drops.

What is the alternative theory to the 'death spiral' regarding the impact of halving on Bitcoin's price?

The alternative theory suggests that if the demand for Bitcoin remains the same and the supply is halved, the price should double to rebalance the supply and demand. This theory is based on microeconomics and has been observed to some extent in past halvings.

How does the halving affect the countdown estimates provided by different websites?

The halving affects the countdown estimates because they are based on the assumption of a constant block time and difficulty. Since the difficulty adjusts every two weeks, the estimates may vary until the next difficulty retargeting, after which the estimates should converge.

Outlines

00:00

🔑 Understanding the Bitcoin Halving

The speaker introduces the concept of Bitcoin halving, explaining it as a regular event occurring every 210,000 blocks on the Bitcoin blockchain. This event reduces the block subsidy, which is the reward miners receive for mining a block, by half. The speaker recounts their experience with Bitcoin since its inception, discussing the halving events that have occurred historically and the reduction in block rewards from 50 BTC to 25, then 12.5, and finally to 6.25 BTC. The explanation includes a discussion of the technical aspects of the halving process, such as the binary division that occurs within the blockchain and the implications for the smallest unit of Bitcoin, the satoshi. The speaker clarifies that the halving is not a traditional division but a binary one, which involves shifting binary digits to the right. They also address the misconception about the potential for fractions of a satoshi and explain that the blockchain only records integer values of satoshis.

05:00

📉 Debunking the 'Death Spiral' Theory

The speaker addresses common misconceptions and media speculation surrounding the Bitcoin halving, particularly the 'death spiral' theory. This theory suggests that when the block reward is halved, miners will become unprofitable and turn off their equipment, leading to a collapse of the network. The speaker refutes this theory by explaining the diversity among miners in terms of equipment efficiency and electricity costs, which means that not all miners become unprofitable simultaneously. They also discuss the network's ability to adjust through difficulty retargeting, which occurs every 2016 blocks, and how this mechanism ensures the network's resilience. The speaker humorously compares the 'death spiral' predictions to other sensational media stories, such as the world ending due to an eclipse, highlighting the cyclical nature of such unfounded speculation.

10:02

📈 The Halving and Market Speculation

The speaker discusses the various market speculations that arise during the Bitcoin halving, focusing on two main narratives. The first is the overly optimistic view that the halving will cause the price of Bitcoin to double due to a reduction in supply while demand remains constant. The speaker explains that this has happened in the past but is not a guaranteed outcome. They also mention the current market conditions, noting the all-time high hash rate and the involvement of institutional investors, which could influence the market's response to the halving. The second part of the paragraph is a prediction by the speaker, who humorously states that nothing significant will happen immediately after the halving, contrary to the dramatic predictions. They suggest that the halving will be a non-event in the short term, with the real effects being more gradual and market-driven.

Keywords

💡Halving

Halving refers to the event in the Bitcoin network where the block reward, the amount of Bitcoin miners receive for adding a new block to the blockchain, is reduced by half. This occurs approximately every four years or after every 210,000 blocks. In the video, halving is a central theme as it discusses the anticipation and effects of this event on the Bitcoin network and its economy.

💡Block Subsidy

Block subsidy is the portion of the block reward that is newly created Bitcoin. It is distinct from transaction fees that miners also earn. The video explains that the block subsidy is halved during a Bitcoin halving, which impacts the profitability of mining and the issuance rate of new Bitcoin into the economy.

💡Satoshi

A Satoshi is the smallest unit of Bitcoin, representing one hundred millionth of a Bitcoin (0.00000001 BTC). The video emphasizes that while Bitcoin is commonly quoted in larger units, the blockchain records all transactions in integer Satoshis. This detail is crucial for understanding the precision and granularity of Bitcoin's monetary system.

💡Genesis Block

The Genesis Block refers to the first block in the Bitcoin blockchain, mined by its creator, Satoshi Nakamoto. The video mentions that at the time of the Genesis Block, the block reward was 50 new Bitcoins, setting the initial conditions for the Bitcoin network's monetary policy.

💡Hash Rate

Hash rate is a measure of the computational power of the Bitcoin network. It indicates how many hashes (or calculations) the network can perform per second. The video discusses the significance of hash rate in relation to mining difficulty and the security of the network, especially in the context of halving.

💡Difficulty Adjustment

Difficulty adjustment is the mechanism by which the Bitcoin network adjusts the complexity of mining a new block to maintain a consistent block time of approximately 10 minutes. The video explains that after halving, if the hash rate drops significantly, it will take longer to mine a block, triggering a difficulty adjustment to ensure the network continues to function efficiently.

💡Death Spiral

The term 'death spiral' in the video refers to a speculative narrative that suggests a halving could lead to miners becoming unprofitable, causing them to shut down, which in turn could lead to a drop in the Bitcoin network's security and functionality. The video counters this narrative by explaining the diversity among miners and the network's resilience.

💡Supply and Demand

Supply and demand is an economic concept that describes the relationship between the quantity of a good or service available and the desire for it among consumers. In the context of the video, it discusses how the halving might affect the price of Bitcoin by reducing the supply of new Bitcoins while demand remains constant, potentially leading to an increase in price.

💡Institutional Investors

Institutional investors are organizations such as banks, insurance companies, and pension funds that manage large amounts of money. The video suggests that the presence of institutional investors in the Bitcoin market could influence the dynamics of halving, as they may have different reactions and strategies compared to individual investors.

💡Off by One Error

An off by one error is a common programming mistake where a sequence or count is incorrectly started or ended, often due to not including zero in the count. The video points out that the Bitcoin halving interval calculation has such an error, which slightly affects the timing of difficulty adjustments and the anticipation of when the next halving will occur.

Highlights

The halving is a regularly scheduled event on the Bitcoin blockchain that occurs every 210,000 blocks.

The block subsidy, part of the miner's reward, is reduced by half during the halving.

At the Genesis, each block reward was 50 new Bitcoins.

The first halving occurred in 2012, reducing the block reward to 25 Bitcoins.

The block reward was further reduced to 12.5 Bitcoins in 2016, and then to 6.25 Bitcoins in 2020.

The upcoming halving will reduce the block reward to 3.125 Bitcoins.

In the Bitcoin system, all values are recorded in integer Satoshis, not Bitcoins.

The halving is not a traditional division but a binary division achieved by shifting binary digits to the right.

Fractions of a Satoshi do not exist; the smallest unit is a whole Satoshi.

The Bitcoin network will not have fractions of a Satoshi; it will round up to the nearest whole Satoshi.

After 64 halvings, the block reward will reach zero, and no further reductions will occur.

The halving does not lead to a 'death spiral' as some media speculate; the network adapts.

Miners are not a monolithic block and have diverse circumstances affecting their profitability.

If the hash rate drops significantly, the difficulty retargets to maintain block times.

Some predict a doubling of Bitcoin's price due to the reduced supply during the halving.

Previous halvings have seen a delayed market response that can take up to six months.

This halving is different due to the all-time high hash rate and the presence of institutional investors.

The halving countdown estimates vary due to the difficulty in predicting the exact time until the event.

The Bitcoin network has an 'off by one' error in calculating the halving interval.

The speaker predicts that at the moment of the halving, nothing significant will change immediately.

Transcripts

as you all know uh I'm sure we are on

the verge of a having and this is the

fourth having so before I go into the

questions for this uh sequence I'm going

to talk a bit about the having and my

experience of it over the last um uh I

guess it's almost 12 years now U that

I've been involved with Bitcoin and

monitoring and paying attention to this

stuff so the having is a regularly

scheduled event that happens on every

210,000 blocks of the Bitcoin blockchain

every 210,000 blocks something changes

and what changes is the block subsidy

which is part of the reward that miners

earn by mining a block of Bitcoin the

the the block subsidy is reduced by half

so on Genesis when Satoshi launched the

network every block included 50 new

Bitcoin 50 50 new minted newly minted

Bitcoin as part of the rewards so every

block minded the minor who mind it would

earn 50 Bitcoin 210,000 uh blocks or

about four years after that um in 201 uh

2012 um the first having occurred and

the block reward was reduced to 25

Bitcoin and that was my first having um

so I was around for the first one uh

four years later in 2016 the block

having happened again uh at the

420,000 Block and uh the reward went

from 25 Bitcoin to 12 and a half Bitcoin

and then after that uh in um 2020 um it

went down to 6 and a quarter and then 5

days 10 hours 26 minutes is uh it will

go from 6 and a quter to 3 and8 or

3.125

Bitcoin all right let's uh dispel some

myths look at some of the questions that

arise around this time and talk about

some of the most common concerns that

people have around this special time so

first of all um we say for Simplicity

that the reward will be 3 and an e or

3.125 Bitcoin but of course on the syst

in the software in the blockchain

Bitcoin does not exist as a unit of

measurement what is measured instead is

Satoshi so in fact uh the reward will be

uh 312 mil 500,000 Satoshi that's the

new uh block reward uh because every uh

Bitcoin is 100 million satoshis and

satoshis are the only thing that exists

so values in Bitcoin in the system are

recorded in integer satoshis we use the

Bitcoin metric or unit uh for

convenience and of course that forces us

to put a decimal uh point and several

digits after the decimal points in order

to get any kind of accuracy um and but

in the system we only measure

soses so this is interesting because

this uh has some implications about what

happens during the having what happens

during the having is is not a division

um not in the traditional sense it's a

binary division which happens by

Shifting the binary digits to the right

so if you take a binary number and you

shift it right what happens is it

divides it by two

um so for example the binary number uh

the the decimal number two in binary is

one Z if you shift that right it becomes

01 and that's how you divide two by two

and get one as the result I don't know

if that made any sense um but that's how

it works so shifting rights in binary Is

How We Do the division which also

answers an interesting question we get

uh Queen doops asks uh by 2048 it looks

like the reward may get down to

fractions of a sedoi does it just round

up or round down down to the fullest

Satoshi so fractions of a Satoshi

fractions of Satoshi do not exist

Satoshi is always recorded as an integer

the only place where we do have less

than a Satoshi we go down to Billy

Satoshi is the lightning Network and in

that case in fact it is rounded up when

it hits the blockchain to uh integer

Satoshi so what happens when you take uh

the binary number one uh which is the

smallest integer one Satoshi reward at

some point and it's actually going to be

in the year 2142 approximately what

happens when you shift that right by one

position becomes zero that's all all

that happens now in binary arithmetic

actually it doesn't become zero and

here's an interesting bit of historic

trivia from the Bitcoin system because

Satoshi wrote this equation to Simply

shift right um what happens is after um

64 havs um the number shifts right and

it goes from one Satoshi and then in

binary if you shift right and there's

only one digit what it does is it wraps

around to the maximum number you can

encode as a binary number so so that one

ends up going to the other side to the

left um which if you uh have perhaps

already figured it out means that based

on the original implementation of the

formula that exists in the Bitcoin uh

Network in the last having the reward

would go from one Satoshi uh to um I

believe it would have been six billion

Satoshi uh 6.4 billion Satoshi um as the

reward of the very next block which is

not desirable not desirable some might

even call that a bug uh so that uh in

fact someone noticed this and a patch

was made to bitcoin core and has been

replicated in every other client that

has implemented this formula to make

sure that that doesn't happen so um the

last having will take us from one

Satoshi to zero Satoshi reward that's it

it's as simple as that right um so we

only count in integers there will not be

fractions of Satoshi recorded now

another strange things H happens during

the having and that is a flurry of

speculation especially among uh media

that is not Bitcoin Savvy about what the

impact of the having will be on the

price on the health of the network Etc

Etc and we see these uh this frenzy of

media speculation repeat every four

years and every four years is the exact

same story the first and uh most common

story we hear is known as the death

spiral so basically the story goes like

this um when the having happens and the

reward per block is reduced by half

miners will find that they are suddenly

unprofitable uh based on the current

price of Bitcoin and the amount of

energy they used to mine and the current

difficulty all of those are parameters

that go into whether they're profitable

or not when they discover they're

unprofitable they're going to go oh well

that was fun um I guess uh 14 years is

enough and then they will turn off their

Miners and stop Mining and um all of

them will do this uh simultaneously and

uh the result will be that uh there

won't be another block because the

difficulty will be too high there won't

be enough miners the hash rate will drop

it will take too long to mine the next

block which will reduce the

profitability for more miners who will

then turn off which will reduce the

profitability for more miners who will

turn off because we're never getting to

a difficulty adjustment have to mine

2016 blocks to get to a difficulty

adjustment and if miners are dropping

like flies we never even get to the next

block lot Al loone 2016 blocks to

actually get the difficulty to retarget

and so as a result the network grindes

to a halt and uh this is described as

bitcoin's death spiral has been

predicted um every four years uh before

the having people write uh articles all

about this it's a very exciting story

right it's a very clickbaity story um

here's why Bitcoin will crash um on

April 19th

now um I love stories like this in fact

um we had a similar type of scenario

recently on April 8th uh during the um

the annular Eclipse that was happening

over the continental United States and

um that story came with another

predictable media story and frenzy of

speculation that is probably as old as

eclipses which was that the world would

end um because of a shadow of um the

moon and so the world would end on April

8th uh I know in the US a lot of people

were preparing for the Rapture my

favorite story was one lady who spent

the previous few weeks uh going to her

favorite Diner and tipping uh hundreds

and hundreds of dollars on every meal

she wanted to get uh give out all of her

money um before the Rapture uh to kind

of swear her accounts with God and that

of course the Rapture didn't happen and

predictably on April 9th she went back

and asked for a refund uh claiming that

it was fraudulent um so the Rapture

didn't happen uh and neither will

bitcoin's death spiral uh the world did

not end um but despite the fact that

this is a story that simply based on

looking at the previous forcas you could

dismiss as fanciful U we are hearing it

again so a lot of people are worried

about the death spiral with Bitcoin now

the reason why this story doesn't make

sense is because miners are not a

monolithic uh block um they uh are

experiencing uh a very broad variety of

circumstances which will inform their

decisions on profitability so if all

miners were running the same equipment

with the same efficiency uh buying

electricity from the same electricity

provider at the same price um and the

Bitcoin price didn't change while the

rewards dropped by half yes all miners

would become unprofitable at the same

time and if they somehow failed to

notice that this was coming um but in

fact miners have a broad variety of

equipments even within a single mining

Fat Farm uh between miners there'll be

different equipments with different

efficiency they buy electricity from

vastly different um electricity

providers at vastly different prices and

so while some miners may become while

some miners may find that some of their

equipment in some of their locations has

become unprofitable and turned that

equipment off not all equipment at all

locations and not all miners will become

un profitable at the same time and so as

long as there are enough miners to mine

the next block uh and if you do the math

it's really simple if half the miners

disappeared all that means is that the

next block would come out in 20 minutes

instead of 10 um even if half the miners

turned off their equipment and the hash

rate dropped by half um we would then

have 20 minute blocks and we would have

20-minute blocks for 2,000 blocks uh

which would mean four weeks and then

after four weeks there'd be a difficulty

retargeting the difficulty would drop by

half um and all of the miners who hung

in there and kept their um systems um

would suddenly become very

profitable there's another story that

comes out around having and that is um a

a pure microeconomics story and that

pure microeconomics story looks at um

Bitcoin itself as a commodity that is

priced based on a supply demand curve um

as if it's a consumable commodity and

that story says well if demand Remains

the Same and Supply is reduced by half

the price equilibrium will have to um

rebalance at Double the price right so

if you have a fixed demand for a product

and Supply is reduced by half then the

price of that product should double in

order for supply and demands to um to

match again um that story is the overly

optimistic rather than the Doomsday

scenario and that story comes from a lot

of people who are looking at this as an

opportunity to profit so the having

represents a giant boost in the price

that story isn't so easy to dismiss uh

and it's not so easy to dismiss because

in the last three having that more or

less did happen um now it doesn't happen

instantly um um and it doesn't happen

predictably and it doesn't happen

linearly instead what happens is there's

a delayed response while the market

catches up to the news and sometimes

that delayed response is as big as six

months um the supply crunch certainly uh

puts a lot of pressure but um in many

cases all that does is suppress demand

um and people are waiting they will wait

to see what's going to happen with the

price um and then gradually it goes up

and usually it overshoots uh so instead

of doubling it usually goes a bit higher

than that now that's what happened in

the past will that happen this time

obviously I don't know and anybody who

tells you that they know is lying um but

interestingly enough things are a bit

different this having uh first of all um

in many of the previous

um the second thing that's different is

we're going in at an all-time high hash

rate again um preceding the event um and

we're going in with institutional

investors so all of those things are new

and who knows what happens next um we'll

find out so that's the story of the

having which happens in five days now if

you go online and you look for live

countdown or Bitcoin having clock or

Bitcoin having live countdown clock or

some combination of these you're going

to find five or six different websites

and those websites are going to tell

you um the estimated time remaining two

weeks ago those Clocks Were um had

vastly different um estimates and the

reason they had vastly different

estimates is because they didn't know

what difficulty and hash rate would be

um during this Epoch uh there's since

been a retargeting of difficulty which

happens every two weeks on average and

so now we know what the difficulty going

into this is and assuming that the hash

rate remains stable you're now going to

see that the estimates for when this is

going to happen are going to converge

and and now the difference you're going

to see in the estimates depends on how

they calculate um the 78 three blocks

that remain until having so what's the

obvious way you can count this you can

say well 783 blocks times 10 minutes

each that's 7 7830 minutes until having

it right easy peasy straightforward and

probably wrong um part of the reason

it's wrong is because U Bitcoin has

another bug that isn't often discussed

which is the having interval is actually

calculated across

2016 um uh blocks uh sorry every it's

calculated every 2016 blocks but it's

calculated on the time stamp and bis of

the past 2015 blocks um that's another

classic error that exist in programming

it's called an off by one error it's

when you forget to count zero as uh one

of the numbers in the sequence and you

think you're starting at one which in

programming is never the case so um as a

result of that um the difficulty adjusts

to be slightly faster every retargeting

period um and so if we look at the last

retargeting period we might assume that

instead of 10 blocks it's actually

closer to uh instead of 10 minutes it's

actually closer to 99 minutes 50

something um seconds uh in terms of the

actual difficulty so that's uh some

historical information about how where

we are why we're here and what happens

uh next um and now we wait and in five

days I have a prediction to make what is

going to happen in five days and the

answer is really um nothing uh none of

these scenarios are going to play out um

because usually at the moment of the

having nothing really changes except for

the block subsidy uh nobody turn starts

turning off um mining machines the

nobody dives into the markets and starts

buying that specific block um to Catch

the Wave in fact most uh every time

we've seen it everybody just holds their

breath um for a day or two to see how

things are going to play out um and so

my prediction five days 10 hours from

now nothing's going to happen other than

uh block 840,000 And1 is going to come

out and if you look in the coinbase of

that block you will see that the reward

is 3.125 Bitcoin hi thanks for watching

the video I'm Andreas antonoplos I'm the

author of mastering Bitcoin mastering

ethereum and the internet of money

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