The bitcoin halving and quantitative hardening

You have heard of quantitative easing, but what about the opposite — quantitative hardening? Jamie Redman, in a recent article that takes a look at the bitcoin halving writes: “The first two halvings correlated with gigantic price surges and speculators are assuming the next “quantitative hardening,” will produce the same effect.”

The first halving was in 2012 when the bitcoin price was around $11 per coin (imagine!!) and by the end of 2013 it was at $1,150. The second halving was in 2016 and it was followed by the spectacular bull run of 2017, when BTC rose from $650 in 2016 to $19,600 in December 2017. So, you can see why people think the same thing may happen this time, although not everyone agrees.

The quantitative hardening refers to the reduction in rewards for BTC miners caused by the halving. For example, after the last halving event, miners saw the 25 BTC reward slashed to 12.5 coins per block. This time the rewards will be reduced to 6.25 coins per block. The bitcoin system will continue to produce block rewards and halve every four years, until on or around the year 2140.

Redman explains that the way Satoshi Nakamoto built the bitcoin blockchain means it is a system that is “a synthetic form of inflation protection, meant to keep BTC scarce over the course of its history. At the moment, bitcoin’s inflation rate is around 3.8% per annum, and this will drop to around 1.8% after the halving this month. “Estimates also show that through the year 2025 and the halving in 2026, BTC’s inflation rate will be as low as 0.4%,” Redman says, and at 1.8% it will be lower than the world’s central banks’ benchmark reference rate. “Soon after that, the issuance will even outshine the precious metal gold,” which sounds enticing. This will happen because “it will be slower to produce than all the gold mined on earth being added to circulation.”

The halving has huge implications for miners, because every time it means their profits are cut by half, and in order for them to profit, the price must balance the amount of capital they are putting into operations. Moreover, if transaction fees alongside the price of bitcoin is lower than what they are spending, they will be forced to shut down

Many eyes will be on bitcoin’s price and hashrate after the halving. What we really want to see is a price rise above above what it costs to mine blocks, which should increase the hashrate and the system’s security. Tradeblock assumes the price per BTCneeds to be at least $12,500 per coin to avoid a mass exodus of miners.

As Redman says, the three most-watched data points during the next 24 hours and during the next few weeks will be the countdown clocks, bitcoin’s price, and the hashrate.

Are you watching?

Is ‘The Simpsons’ ahead of the Bitcoin curve?

One of my colleagues recently shared an anecdote with me about ‘The Simpsons’. She told me that during a chat about politics, her son told her, “Well, it was on ‘The Simpsons’ and then it came true.” And then he asked her, “How do they do that?”

Indeed, how is it that the long-running animated series appears to be a more reliable source of future predictions than Nostradamus, or even the MSM? So, I was very interested when one of the writers I follow, Billy Bambrough, published an article at Forbes about the The Simpsons’ predictions for Bitcoin

It’s true that cryptocurrencies, and in particular Bitcoin, have been mentioned in a number of shows, perhaps most relevantly in ‘Silicon Valley’, as well as in The Big Bang Theory, but who might have expected that Luno, a major bitcoin and cryptocurrency exchange, would turner to the Simpson family’s past prediction to figure out when Bitcoin might go mainstream.

Bambrough refers us to an episode that aired on 23rd February, which I must admit I didn’t see. It featured Jim Parsons, who plays Sheldon Cooper in ‘The Big Bang Theory’, and in it, Bitcoin is described as ‘the cash of the future” and that this future is coming closer “each day.”

As Bambrough points out: “Over the show’s 30-year run The Simpsons have correctly predicted Donald Trump becoming U.S. president, the NSA spying scandal, Apple’s FaceTime, smartwatches, and the Disney takeover of Fox.”

Now, here is the interesting bit. The analysts at Luno have calculated that it takes an average of 15.6 years for a ‘Simpsons’ prediction to become reality. That means we’ll see mass adoption by 2036. Marcus Swanepoel, Luno’s chief executive, said, “It seems the creators behind The Simpsons have a knack for picking up on things that seem out-of-this-world, and a way of portraying the impossible as part of day-to-day life,” adding, “I wouldn’t be surprised if they’ve overshot their prediction slightly in this case.”

Indeed, the very fact that ‘The Simpsons’ are talking about crypto and Bitcoin on-screen may give adoption a very helpful nudge, because there is no doubt that public perception and awareness is one of the most important factors in digital assets going mainstream.

Perhaps we should all be keeping a closer eye on ‘The Simpsons’ — it’s obviously about so much more than eating doughnuts!

Who’s in the Forbes Blockchain Top 50?

The Forbes annual Blockchain 50 is on its second outing. It lists the companies making the biggest strides in blockchain, and most of them are valued in the billions of dollars. Indeed, to appear on the list, Forbes says, “To qualify, Blockchain 50 members must be generating no less than $1 billion in revenue annually or be valued at $1 billion or more.

There are some surprising names that turn up in the Blockchain 50, if only because on the face of it they have little to do with blockchain.

For example, De Beers is on the list. The diamond giant’s new software, Tracr, follows diamonds through the supply chain as they are mined, cut, polished and sold and tens of thousands of stones are being registered per month.

Foxconn makes the iPhone trade-finance venture, Chained Finance, pays more than 20 electronics suppliers using digital coins minted on the Ethereum blockchain. As a result the costs have dropped from annual percentage rates as high as 24% to a mere 10%.

Dole Foods is another blockchain adopter. It is using it across all vegetable processing, for millions of pounds of lettuce, spinach and coleslaw. Customers at Walmart can now check where their fruit comes from by scanning a code used by farmers. It is soon expanding this use of blockchain to its fruit.

LVMH, the luxury goods brand, is using blockchain technology for traceability and proof of authenticity. Among its brands, Louis Vuitton is already tracking millions of its products in an effort to reduce counterfeiting.

The United Nations, a 75-year-old organisation is using a number of blockchain initiatives, including one that is intended to combat warlords who steal aid using pilfered ID cards, the UN has over the past two years disbursed funds to 106,000 Syrian refugees in Jordan, using blockchain-verified iris scans instead of ID cards.

As Forbes says in its introduction to the Top 50, “Blockchain started as a way to move bitcoin from point A to point B, but it is now being used by a host of big companies to monitor and move any number of assets around the world as easily as sending an email.”

From the instantaneous settlement of German government bonds to verifying the provenance of diamonds mined in Africa and bringing liquidity to a small supplier of sliding shower doors in Zhongshan, China, this year’s members have largely moved beyond the theoretical benefits of blockchain, to generating very real revenues and cost savings.

Is Jack Dorsey a Bitcoin hero?

Jack Dorsey is a curious character. The combination of his business success with a somewhat eccentric lifestyle pretty much guarantees media and public interest in him. He may not be as well known as Mark Zuckerberg, but he’s probably more easily identifiable by the public than the Google guys for example. Plus, he does often look as if he might have had a lead role in Pirates of the Caribbean, or some other Hollywood production. However, what in my opinion is most interesting about him is the role he has played in promoting cryptocurrency, particularly Bitcoin.

Dorsey is not only a co-founder of Twitter, he also launched Square, a mobile payments company that is hot on crypto. Dorsey is known to be a massive Bitcoin supporter, and has vowed to help Bitcoin develop as a global currency though Square. However, he is not a Bitcoin bull — he has a diverse crypto portfolio and is always upfront about that. Square’s spokesperson told Forbes, “it’s “only a matter of time until instant, low-fee bitcoin payments are as common as cash used to be.”

And to speed this along, Dorsey’s Square Crypto division is working on a kit that should help to integrate the Lightning Network with Bitcoin wallets. Lightning is a layer-two solution built on top of the Bitcoin network that makes payments faster and cheaper, and speed and cost are key elements of taking Bitcoin mainstream.

Until now there has been a problem with scaling Bitcoin for everyday payments, and this has slowed down adoption. Dorsey wants to supercharge the leading crypto’s throughput, which is why Square announced its Lightning Development Kit (LDK) to coincide with the World Economic Forum in Davos, although it was definitely no coincidence.

As Gerelyn Terzo writes at CCN, “What Dorsey’s crypto division plans to do is give developers greater flexibility with Bitcoin and Lightning technology that in a nutshell comes down to streamlining bitcoin wallets.”

Essentially, the Lightning Network can potentially process millions of transactions per second, which is massive compared with Visa’s 45,000 transactions per second.

Dorsey deal with the volatility issue

Improving the speed and cost of Bitcoin transactions is one thing, but merchants are reluctant to accept the cryptocurrency because of its volatility. Dorsey and Square have a solution for that as well.

Square has been granted a patent that enables users to conduct fiat-to-crypto transactions. The customer can pay in bitcoin and the merchant can instantly convert it to U.S. dollar or any currency.

Basically, Dorsey is laying the foundations of an infrastructure for widespread Bitcoin use, because with instantaneous payments that can be converted into any currency, both customers and merchants have no reason to deny Bitcoin as a payment option.

If Dorsey and Square achieve this, they will surely be hailed as Bitcoin heroes. Unless you’re a Bitcoin hater!