Amidst the anticipation surrounding the upcoming Bitcoin halving and its potential impact on the price of BTC, it’s crucial to maintain a grounded perspective. This article is part of CoinDesk’s “Future of Bitcoin” series, coinciding with the fourth Bitcoin halving in April 2024.
David Bailey, serving as the chief marketing officer for Azteco, provides insights into the significance of the halving event. In essence, the halving represents a routine adjustment in the compensation received by those processing Bitcoin transactions. Similar to conventional electronic payments facilitated by credit cards or mobile apps like Venmo, Bitcoin transactions require processing.
These transactions are managed by miners, who validate and record them on the blockchain. Until now, miners have received rewards in the form of block rewards from the Bitcoin network and transaction fees paid by users. The upcoming halving event halves the block reward, a predetermined measure intended to regulate the issuance of new bitcoins until the maximum limit of 21 million bitcoins is reached.
While the reduction in the block reward is expected, its impact on network transaction fees is noteworthy. This reduction serves as a stark reminder of Bitcoin’s limited supply, with the total issuance capped at 21 million bitcoins. Unlike fiat currencies, Bitcoin’s supply cannot be manipulated or increased by governments.
Bitcoin’s comparison to “digital gold” is apt, yet there are distinct differences to consider. Unlike gold, which has a finite but unknown supply, Bitcoin’s supply is fixed and known. Additionally, Bitcoin is infinitely divisible, allowing for transactions of fractional values, whereas gold lacks such divisibility.
The halving underscores Bitcoin’s limited supply and increasing demand, which contributes to its long-term price appreciation. As Bitcoin becomes more valuable, its adoption grows, driving demand further.
In the short term, the halving will likely lead to a shift towards processors offering lower-cost transaction fees. The Lightning Network, a second-layer network for Bitcoin transactions, emerges as a preferred option for its low fees and near-instant transaction processing. This shift may accelerate consumer adoption of Bitcoin due to its ease of use and affordability.
While on-chain transactions will persist for documenting large transactions, the rise of second-layer networks like Lightning is expected to offset network congestion and encourage greater transaction volume. Despite the increase in network fees, the overall impact is positive, as it enhances Bitcoin’s functionality as a global currency accessible to all, especially the financially disenfranchised population lacking access to traditional banking services.
Ultimately, the halving event, by fostering the adoption of second-layer networks, enhances Bitcoin’s utility and accessibility, paving the way for broader adoption and financial inclusion.
Related posts：
