Bitcoin halving, a reverse wheat and chessboard effect
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The upcoming bitcoin halving has reminded me of the wheat and chessboard problem but then in reverse. This is a great part of the con called bitcoin. So each halving is equivalent to going to the next square on the chessboard, and the number of bitcoin rewarded is equivalent to the grains of wheat on the square. But now, moving to each new square on the chessboard we get a halving instead of a doubling.
So let's see what that looks like using a visualization:
But maybe this visualization isn't clear enough, because we people are really bad at understanding this effect, so let's also show this using a table:
| From | Block reward | Total % | Bitcoin created | Total bitcoin |
Remember the coin creation downward pointing pyramid? This is the actual representation of how this works with the coin creation. And people still expect the same 'halving effect' as with past halvings, because they think that bitcoin will become scarcer. They just don't take into account this reverse wheat and chessboard effect, and don't seem to understand that the halving effect is diminishing each halving, making it negligible against the free float. So, I hope that by using a visualization and using data displayed in a table that you now start to understand this reverse wheat and chessboard effect.
Each halving, the effect of the halving on the supply of bitcoin becomes less and less. Currently the only real effect on the supply of bitcoin is that people HODL bitcoin, they keep the bitcoin registration on their wallet instead of selling their bitcoin and thus limiting the supply. But remember that supply is only at one side of scarcity, there is also the demand side that needs to be larger than the supply side. Currently, due to HODL, the supply side is artificially lower as the demand side, but if people want to cash out on their 'winnings', this could rapidly change. Also, if more and more people are loosing interest in bitcoin, the demand side could decline as well.
With the declining bitcoin creation, the bitcoin reward for the miners also declines. As costs for mining rises, this all needs to be compensated for in the bitcoin price. As the price is depended solely on supply and demand, this will become a problem at one time. Bitcoin was doomed from the start to end badly this way. I hope that this all will make you realize that bitcoin was a con from the start.