Understanding Bitcoin's Halving and Its Role in Controlling Inflation
How the halving reward looks after each halving, since 2009
Hi Plebs,
As the world anxiously awaits the upcoming Bitcoin halving event ~April 20th 2024, it's important to examine this phenomenon through the lens of monetary history and inflation. At its core, the halving is a key mechanism designed to control and limit new Bitcoin supply over time, mimicking scarcity attributes of commodity money like gold.
The Perils of Unchecked Money Printing
Fiat currencies issued by central banks have exhibited a troubling pattern - when the money printers run unabated, hyperinflation inevitably rears its ugly head. We need not look further than recent examples in Venezuela, Lebanon, and the extreme historical cases of Weimar Germany in 1923 and Zimbabwe in 2007.
In Venezuela, years of economic mismanagement, excessive money printing, and a lack of an independent central bank have rendered the bolivar essentially worthless. Prices have doubled every few weeks, with annual inflation rates reaching a staggering 1.8 million percent in 2018. A monthly minimum wage can barely cover a box of eggs.
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Lebanon's currency has plunged over 90% against the U.S. dollar amidst a banking crisis, default on sovereign debt, and a shortage of foreign reserves needed to import basic goods. Families once comfortably middle-class now struggle to afford life's necessities.
These catastrophic examples pale in comparison to the sheer depravity witnessed in Weimar Germany and Zimbabwe, where banknotes became practically worthless overnight. Tales of people bringing wheelbarrows of cash to buy a loaf of bread have become parables of an unmoored monetary system run amok.
Bitcoin's Controlled Supply
In stark contrast to these inflationary disasters, Bitcoin was purposefully designed with a controlled, transparently issuance rate written immutably into its protocol. The system started with 50 new bitcoins created roughly every 10 minutes in what's called the "block reward." This rate gets cut in half every 210,000 blocks (about every 4 years) until all 21 million bitcoins are mined by the year 2140.
This upcoming halving is simply the latest programmed step in that trajectory, with the block reward dropping from 6.25 to 3.125 bitcoins. It's a calculated supply restriction that fundamentally separates Bitcoin from fiat's failings and introducing true scarcity in line with finite commodity monies like gold.
By capping the total supply and instituting a predictable issuance schedule, Bitcoin is the antidote to hyperinflationary abuse and debasement. Its proponents argue this hard-coded monetary policy helps buttress Bitcoin's purchasing power over time and prevent excess money printing that has plagued fiat regimes worldwide.
As the halving approaches, market observers will closely monitor economic indicators like price, hash rate, mining profitability, and velocity to gauge its impacts. But one notion rings clear - through an ingenious system of controlled production, Bitcoin offers the world an escape from the insidious boom-and-bust cycles that fiat debt-based money inevitably suffers.
Cheers, and onwards with Bitcoin
