As
the
world
gets
into
a
frenzy
around
the
coming
Bitcoin
halving
–
and
the
price
of
bitcoin
(BTC)
as
a
result
–
it’s
important
to
take
a
moment
for
a
reality
check.
This
feature
is
part
of
CoinDesk’s
“Future
of
Bitcoin”
package
published
to
coincide
with
the
fourth
Bitcoin
“halving”
in
April
2024.
David
Bailey
is
chief
marketing
officer
for
Azteco.
The
halving
is
a
non-event
for
the
vast
majority
of
the
world.
At
its
core,
it’s
a
simple
evolution
in
how
much
the
people
who
process
bitcoin
transactions
get
paid.
All
electronic
payments,
whether
made
via
credit
card,
Venmo
or
the
tap
of
a
phone,
require
some
kind
of
processing.
Bitcoin
transactions
are
no
exception.
On-chain
bitcoin
transactions
are
processed
by
the
vast
network
of
so-called
“miners,”
who
validate
and
record
transactions
on
the
blockchain.
To
date,
these
miners
receive
two
types
of
rewards:
a
block
reward,
paid
by
the
bitcoin
network,
and
a
network
transaction
fee,
also
paid
in
bitcoin
by
the
person
making
the
transaction.
The
coming
“halving”
reduces
the
first
reward
by
half.
There’s
nothing
surprising
in
this.
Rather,
the
halving
is
a
predetermined
part
of
the
system,
designed
to
regulate
the
supply
of
new
bitcoins
in
a
predictable
manner
until
the
maximum
of
21
million
bitcoins
have
been
issued.
Sometime
in
the
next
century,
given
current
trends,
the
block
reward
for
processing
bitcoin
payments
will
halve
until
it
goes
toward
zero.
But
the
result
of
the
decrease
in
the
block
reward
has
a
substantial
impact
on
the
second,
the
network
transaction
fee.
The
increase
in
transaction
fees
is
a
stark
reminder
that
the
supply
of
bitcoin
is,
by
design,
limited.
Once
21
million
bitcoins
have
been
issued
(as
block
rewards),
there’s
no
way
for
anyone
to
create
more
bitcoins
or
alter
the
supply,
as
governments
often
do
with
their
own
fiat
currencies.
This
is
why
some
people
liken
bitcoin
to
“digital
gold.”
It’s
not
a
bad
comparison
but
there
are
two
important
differences
to
remember:
First,
the
supply
of
bitcoin
is
fixed
at
21
million
bitcoins.
The
supply
of
gold
is
finite,
but
it’s
not
fixed
and
known.
After
all,
who
knows
what
vast
gold
reserves
might
be
discovered
tomorrow?
Second,
bitcoin
is
infinitely
divisible.
As
bitcoin
gets
more
valuable,
people
will
transact
subdivisions
of
value
(for
example,
there
are
100
million
satoshis
in
one
bitcoin).
Gold
is
physical
and
you
can’t
subdivide
it
infinitely
as
it
gets
more
valuable,
though
new
digital
gold
entrants
are
attempting
to
make
gold
act
more
like,
well,
bitcoin.
The
halving
reminds
people
that
the
supply
of
bitcoin
is
truly
limited
and
that
demand
is
increasing,
driving
up
the
price
of
bitcoin
in
the
long
term.
As
something
becomes
more
valuable,
more
people
will
want
to
use
it,
and
so
the
cycle
continues.
In
the
near
term,
the
largest
everyday
impact
of
the
halving
will
be
a
broader
consumer
shift
to
processors
with
lower-cost
transaction
fees.
Enter
the
Lightning
Network,
a
second-layer
network
that
bitcoin
transactions
outside
of
the
main
blockchain.
The
Lightning
Network
processes
peer-to-peer
bitcoin
transactions
almost
instantaneously,
just
like
on
the
main
blockchain.
The
difference?
The
Lightning
Network’s
transaction
fee
is
just
a
few
cents.
For
regular
people
–
those
making
small
transfers
or
using
a
bit
of
bitcoin
to
purchase
goods
and
services
–
this
will
become
the
preferred
mode
of
transacting;
it’s
fast
and
it’s
cheap.
The
relative
ease
of
transacting
with
the
Lightning
Network
may
also
accelerate
consumer
adoption.
See
also:
Exploring
Bitcoin’s
Lightning
Network
On-chain
transactions
won’t
go
away,
of
course.
People
will
continue
to
use
the
blockchain
to
document
large
transactions
–
the
same
way
that
you’d
use
a
wire
payment,
not
a
debit
card,
to
purchase
a
car
or
house.
As
on-chain
network
transaction
fees
continue
to
increase,
network
congestion
will
be
offset
by
the
shift
to
second-layer
networks,
which
will
in
turn
encourage
a
greater
volume
of
transactions,
some
of
which
will
happen
on
the
main
blockchain,
which
will
push
up
processing
fees.
Ultimately,
even
with
the
rise
of
second-layer
networks
like
Lightning,
the
net
result
will
most
likely
be
a
steady
increase
in
network
fees
as
bitcoin
becomes
more
widely
adopted.
And
that’s
a
good
thing.
The
more
bitcoin
acts
like
other
currencies,
the
more
comfortable
people
will
be
using
it.
While
most
of
us
are
not
miners,
many
of
us
are
currently
financially
disenfranchised:
Today
there
are
more
than
a
billion
adults
in
the
world
who
have
a
smartphone
but
no
bank
account.
These
people
are
digitally
connected
to
the
rest
of
the
world,
but
lack
the
benefits
of
participating
in
a
global
financial
system.
For
them,
bitcoin
is
a
strong
solution
for
their
daily
spending
or
personal
savings
–
but
only
if
it’s
fast,
reliable,
inexpensive
and
accessible.
The
halving,
by
spurring
the
adoption
of
second-layer
networks
like
Lightning,
makes
bitcoin
just
that.
