Due to bitcoin’s four year halvings, a lot of price analysis and speculation that you find in the cryptosphere has up to now tended to focus on bitcoin’s cyclical nature.
Just to clarify what exactly the halvings are, what bitcoin miners actually do is use computational power to validate transactions, a process which adds blocks to the
blockchain
Blockchain
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Read this Term. Every time they add a block, a set amount of new bitcoin is created, and they receive that bitcoin as a reward.
A halving event is when the reward amount is halved, and it occurs every 210,000 blocks, which corresponds to roughly every four years. This happened in 2012, 2016, and 2020, and mining rewards have gone from 50 BTC per block to 25, 12.5 and now 6.25.
Up to now, these halvings have indeed corresponded with an intense boom and bust type cycle, initiating tremendous explosions in price, blow-off tops and severe extended corrections. Although having said that, zoom out the chart and all the peaks and troughs, exhilarating though they are, form part of a continuous upward march.
These patterns make sense, but should we expect that the link between halvings and spectacular price fluctuations will last forever (or until 2140, when bitcoin will be fully mined)?
At the beginning of bitcoin’s life, it had maximum volatility, and so the first halving acted like a detonation charge, and the same could be said of the second such event, in 2016. The third halving certainly preceded major price rises but hasn’t played out as many were predicting with no euphoric blow-off top at the end of 2021 to mirror events at the end of 2017.
Of course, we must take into account the unprecedented covid-19 response that has bound and hindered the world with neurotic quasi-communism for the last two years, but even then, it’s likely that future halvings will not play out the same way as those in
bitcoin
Bitcoin
Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities.
Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities.
Read this Term’s ebullient first decade.
At this phase in blockchain technology’s development and adoption, it might be worth turning to an old gem of wisdom called Amara’s Law.
Last new year’s eve, Zhu Su, the Co-Founder of the cryptocurrency hedge fund, Three Arrows Capital and an influential figure in the crypto world, tweeted this:
“Your mental framework should be Amara’s law, not hypercyclicality
Emerging technologies are overestimated in short run and underestimated in long run
2017-2019 period of overestimation
2020-2030 period of underestimation”
He also called 2022, “the year of mass adoption”.
Let’s just zoom in and clear up the key quote there, in Roy Amara’s original attributed words:
“We tend to overestimate the effect of technology in the short run, and underestimate the effect in the long run.”
Roy Amara was a computer scientist at the Stanford Research Institute, and for some time was head of the Institute for the Future, a Californian think tank connected to the RAND Corporation.
His quotation is said to have been made some time in the 1960s or 70s and has subsequently come to be known as Amara’s Law, although it’s really an observation. It has been referenced when thinking about many kinds of new technologies, including nanotech and AI, and seems applicable to what’s happening around cryptocurrencies and blockchain use.
Essentially, what it says is that in the giddy nascent phases when a new technology emerges, there will be boldly utopian estimations of what that tech will do, that are unhooked from its, at that moment, actual level of sophistication and mainstream interest.
This corresponds precisely with bitcoin, when its early proponents had astonishing, almost evangelical conviction about bitcoin’s revolutionary capacity, and were dedicated not only to mining but also to spreading the word in serious technical detail, even if that sometimes meant speaking to almost empty rooms.
Even as this was going on, in the mainstream not much happened. Bitcoin remained on the fringes of awareness and was dismissed by the majority, if it was even acknowledged at all, as either a scam, or of use only to criminals, or, at best, as an irrelevant hobby.
What then follows this stage in relevant cases, according to Amara, is a period of long-term under-estimation, even as the technology matures to a point where it becomes viable.
This means that just before real transformation, there will be a misreading of the situation: that the technology has slumped and is without purpose, when in fact the tech is just at that moment reaching the point at which it can be adopted and initiate disruption.
At this phase, use cases are being built out and picked up on, but it’s not yet widely recognized that the changes occurring are going to replace previously established norms in areas that have society-wide relevance.
Does this look like bitcoin, or crypto and blockchain technology more widely, at the moment? We should pay close attention, because this may be the inflection point at which, through alternative blockchains at the structural core of web3 development, and bitcoin itself as a decoupling from central banks, meaningful transition occurs.
Due to bitcoin’s four year halvings, a lot of price analysis and speculation that you find in the cryptosphere has up to now tended to focus on bitcoin’s cyclical nature.
Just to clarify what exactly the halvings are, what bitcoin miners actually do is use computational power to validate transactions, a process which adds blocks to the
blockchain
Blockchain
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Read this Term. Every time they add a block, a set amount of new bitcoin is created, and they receive that bitcoin as a reward.
A halving event is when the reward amount is halved, and it occurs every 210,000 blocks, which corresponds to roughly every four years. This happened in 2012, 2016, and 2020, and mining rewards have gone from 50 BTC per block to 25, 12.5 and now 6.25.
Up to now, these halvings have indeed corresponded with an intense boom and bust type cycle, initiating tremendous explosions in price, blow-off tops and severe extended corrections. Although having said that, zoom out the chart and all the peaks and troughs, exhilarating though they are, form part of a continuous upward march.
These patterns make sense, but should we expect that the link between halvings and spectacular price fluctuations will last forever (or until 2140, when bitcoin will be fully mined)?
At the beginning of bitcoin’s life, it had maximum volatility, and so the first halving acted like a detonation charge, and the same could be said of the second such event, in 2016. The third halving certainly preceded major price rises but hasn’t played out as many were predicting with no euphoric blow-off top at the end of 2021 to mirror events at the end of 2017.
Of course, we must take into account the unprecedented covid-19 response that has bound and hindered the world with neurotic quasi-communism for the last two years, but even then, it’s likely that future halvings will not play out the same way as those in
bitcoin
Bitcoin
Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities.
Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities.
Read this Term’s ebullient first decade.
At this phase in blockchain technology’s development and adoption, it might be worth turning to an old gem of wisdom called Amara’s Law.
Last new year’s eve, Zhu Su, the Co-Founder of the cryptocurrency hedge fund, Three Arrows Capital and an influential figure in the crypto world, tweeted this:
“Your mental framework should be Amara’s law, not hypercyclicality
Emerging technologies are overestimated in short run and underestimated in long run
2017-2019 period of overestimation
2020-2030 period of underestimation”
He also called 2022, “the year of mass adoption”.
Let’s just zoom in and clear up the key quote there, in Roy Amara’s original attributed words:
“We tend to overestimate the effect of technology in the short run, and underestimate the effect in the long run.”
Roy Amara was a computer scientist at the Stanford Research Institute, and for some time was head of the Institute for the Future, a Californian think tank connected to the RAND Corporation.
His quotation is said to have been made some time in the 1960s or 70s and has subsequently come to be known as Amara’s Law, although it’s really an observation. It has been referenced when thinking about many kinds of new technologies, including nanotech and AI, and seems applicable to what’s happening around cryptocurrencies and blockchain use.
Essentially, what it says is that in the giddy nascent phases when a new technology emerges, there will be boldly utopian estimations of what that tech will do, that are unhooked from its, at that moment, actual level of sophistication and mainstream interest.
This corresponds precisely with bitcoin, when its early proponents had astonishing, almost evangelical conviction about bitcoin’s revolutionary capacity, and were dedicated not only to mining but also to spreading the word in serious technical detail, even if that sometimes meant speaking to almost empty rooms.
Even as this was going on, in the mainstream not much happened. Bitcoin remained on the fringes of awareness and was dismissed by the majority, if it was even acknowledged at all, as either a scam, or of use only to criminals, or, at best, as an irrelevant hobby.
What then follows this stage in relevant cases, according to Amara, is a period of long-term under-estimation, even as the technology matures to a point where it becomes viable.
This means that just before real transformation, there will be a misreading of the situation: that the technology has slumped and is without purpose, when in fact the tech is just at that moment reaching the point at which it can be adopted and initiate disruption.
At this phase, use cases are being built out and picked up on, but it’s not yet widely recognized that the changes occurring are going to replace previously established norms in areas that have society-wide relevance.
Does this look like bitcoin, or crypto and blockchain technology more widely, at the moment? We should pay close attention, because this may be the inflection point at which, through alternative blockchains at the structural core of web3 development, and bitcoin itself as a decoupling from central banks, meaningful transition occurs.
