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research articles

Original research, analysis and reports across the frontier of cryptoeconomics, blockchain technology, and digital assets.
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Analysis

October 21, 2019

Analysis

October 11, 2019

Analysis

October 4, 2019

Analysis

September 26, 2019

Analysis

September 19, 2019

Update

September 12, 2019

Cryptoasset Report

September 5, 2019

Update

August 23, 2019

Report

August 2, 2019

Cryptoasset Report

May 23, 2019

Cryptoasset Report

May 9, 2019

Cryptoasset Report

April 25, 2019

Cryptoasset Report

March 1, 2019

Quarterly Report

February 26, 2019

Cryptoasset Report

December 20, 2018

Cryptoasset Report

December 18, 2018

Quarterly Report

August 20, 2018

Analysis

June 6, 2018

Analysis

April 4, 2018

Token-based fundraising

March 6, 2018

Analysis

March 2, 2018

Token-based fundraising

February 12, 2018

Token-based fundraising

February 4, 2018

Token Sales

December 29, 2017

Introduction

August 2, 2016

Introduction

July 13, 2016

Education

July 4, 2016

Introduction

June 21, 2016

Introduction

June 14, 2016

Introduction

June 7, 2016

Introduction

March 24, 2016

Introduction

March 17, 2016

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Introduction

July 11, 2016

Bitcoin Halving: What is it and Why does it Matter?

Bitcoin's block rewards are scheduled to halve periodically. This article explains why they do so.

Introduction

On July 7, 2016, someone mined Bitcoin block 420,000 and earned 12.5 BTC instead of 25. Known as the "Bitcoin Halving," this event marks when the reward per block mined (and hence, the number of new Bitcoin created) drops in half. This is part of Bitcoin's approach to increasing the total monetary supply.

This is the second halving in Bitcoin's history. The first occurred in November 2012, and the next one is slated to occur in 2020. In total, 33 such events will occur, and once 21 million Bitcoin have been created, the reward per block will drop to zero.

Why does the monetary supply matter?

This approach to creating new Bitcoin is one of the unique currency features of Bitcoin. For many fiat currencies, central banks have the authority to create new money, and they do so according to monetary policy, not an algorithm.[1]

Comparing money creation in Bitcoin and fiat currencies is not simple because the economy of fiat dollars is much more complex than that of Bitcoin, largely because it includes debt, which the Bitcoin economy does not. 1 BTC represents one BTC held by one address on an immutable ledger that can only ever account for as many Bitcoins as are in circulation. 1 USD could represent many more, because banks can lend out a portion of the money held in their accounts: if I deposit 1 USD, you could hold a portion of it in a loan while I also am able to spend it.

Why do miners keep mining if they make less money?

The theory is that transaction fees will gradually increase to maintain incentives for miners to keep mining blocks. Each time someone wants to submit a transaction to be verified, they include an extra amount as a mining reward roughly based on the total value of the money spent. Fees aren't required and the recommended method is actually quite complicated and based on the amount of data the transaction needs. Many Bitcoin wallets and exchanges include them by default, but users have the option of not .

There is some evidence a fee market is taking shape, but they still comprise less than 3% of the total rewards miners earn for getting blocks.

An increase in the Bitcoin price will also maintain incentives for miners. When the last halving occurred, the reward per block dropped from 50 BTC to 25 BTC, but in USD, the reward dropped from approximately $150 to $75. The reward per block today at time of this halving is $8125 - well over 100 times that amount.

[1] Central banks can issue debt without printing new "money," encourage private banks to lend money more or less generously, and otherwise influence the economy through other monetary policy measures. $1000 in US dollar cash can help create many thousands of dollars worth of circulating money, because banks can lend out money that is held in bank accounts, effectively creating new circulating money. The total number of US dollars in circulation is estimated at $1.2 trillion, while the total monetary supply of cash, bank accounts, and mutual funds is estimated at over $10 trillion. Read more about the monetary supply of the US dollar here.