The Bitcoin Halving Doomsday Scenario

There’s been a lot of chatter surrounding the upcoming Bitcoin halving that’s taking place roughly around the end of July 2016. One specific doomsday discussion called the “death spiral” or “halving disaster” has caused some fear within the community.  

Also read: Trump: ‘I’ll Build a Wall Around Banks to Keep Bitcoin Out’

Some Believe, a Halving Disaster, is Imminent

At present, a miner receives 25 Bitcoins per block. When the reward change occurs this summer, the payout will be paid 12.5 per block. If calculations are exceeded by computational power, the July date could change. Now it’s expected by some that roughly around this time frame the price of Bitcoin will increase. This, in turn, would cause increased buying and selling within the network leading to higher per-block transaction volume. One theory presented by Bitcoin developer Luke Dashjr called “Hardfork to fix difficulty drop algorithm” puts to test the halving causing significant amounts of mining power to go offline, making it harder for transactions to confirm timely. Dashjr writes:

“We are coming up on the subsidy halving this July, and there have been some concerns raised that a non-trivial number of miners could potentially drop off  the network. This would result in a significantly longer block interval, which also means a higher per-block transaction volume, which could cause the block size limit to legitimately be hit much sooner than expected. Furthermore, due to difficulty adjustment being measured exclusively in blocks, the time until it adjusts to compensate would be prolonged.”

Following this theory, many others have presented this “death spiral” in discussions. Of note is that quite a few of these theorists represent altcoins and alternative blockchain camps. People say, in theory, when the halving happens, a significant portion of miners will drop off the network. This will make time between blocks longer and transaction capacity to max like it did on February 29th. Theorists claim confirmation times will increase exponentially, and general confidence is lost. Furthermore, with this doomsday scenario, the price will continue to drop says, theorists.

Because Bitcoin is limited and the halving will generate new expressions in supply some say demand the price should increase. The conversation has popped up throughout digital currency forums recently and one redditor believes the “death spiral is a hoax.” The threads author writes, “Miners leaving do not make economic sense. The hoax is being based on a fixed currency rate that bitcoin is not, Bitcoin is a floating currency rate that follows the law of offer and demand.” The writer of the post explains there has been no economic explanation to back up halving disaster claims thus far.  

Due to a suspected hashrate drop people theorize mining may not being profitable. The concern is transaction time will make people lose confidence and proponents for a larger block size increase believe now is the time. Supporters of Classic and other fork alternatives feel this can be remedied by a protocol change. However with the current schism within the community, it doesn’t look like a hard fork will be happening by the end of July. This theory is also what some call fear uncertainty and doubt which is meaningless against the honey badger who doesn’t care what you or anyone thinks. ????

What do you think about the Bitcoin halving doomsday scenario? Let us know in the comments below!

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