Month: April 2024

This article is featured in Bitcoin Magazine’s “The Halving Issue”. Click here to get your Annual Bitcoin Magazine Subscription.

Calculated probabilities were calculated by Greg @ learnmeabitcoin.com

Block 840,000 is not just another block in the blockchain; it triggers the Bitcoin halving where the block reward is reduced from 6.25 BTC to 3.125 BTC, cutting the amount of BTC mined each day in half. You don’t have to be a Princeton economist to understand the impact this will have on the supply and demand dynamics for bitcoin. Beyond the obvious halving of the block reward, a new market has developed around Ordinals which could have a significant impact on what happens to the first block of the halving. Contained within the first block of the halving is an extremely rare “epic sat”. While Ordinals have divided some Bitcoiners on their merit, there is no arguing the impact they have had on Bitcoin.and it raises an important question, could Ordinals cause a blockchain reorg? Through this article we will dig into the basics of a reorg, Ordinals demand, how mining probabilities work, and finally who could pull off a successful reorg.

Before we dig into this “epic sat”, let’s build an understanding of what a reorg is. The Bitcoin blockchain is a slow and dumb database that creates blocks of data every 10 minutes or so. It continues working as intended, but occasionally, things get tense. When two miners find blocks nearly simultaneously, it creates a temporary fork in the blockchain. This moment of overlap leads to a brief period of uncertainty. These forks are resolved by the network through the longest chain rule, which is when the fork tip of the blockchain with more proof-of-work (the longest chain or aka more blocks) will be adopted as the valid chain. Orphaned blocks from the shorter chain are not included in the longer one, and the transactions they contain are returned to the mempool to be included in future blocks. This process of one chain becoming longer than the other and becoming the accepted version is known as a reorganization, or reorg.

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Due to the incentive structures built into Bitcoin mining, reorgs are usually resolved as soon as the next block is found and added to the tip of one of the forked chains. This is because finding a block is extremely difficult, and miners are incentivized to work on the longest chain in order to build the next block, and get paid. If they are mining on the short fork, the rest of the network will leave them behind and they will have invalid blocks. The last thing you would want is to build a block that is rejected by the network because you’ve built a block on a chain and are rejected by the network due to the longest chain rule. During the reorg period of a fork, miners build on whichever chain fork hits their node first and try to build a block to get the longest chain.

Now don’t get worried about reorgs. They happen every couple of months (on average) and typically involve one or two blocks. These short reorgs are part of the network’s regular operation and quickly resolve without any significant impact on the network and its users. It’s worth noting that deep reorgs that consist of many blocks are rare and, correspondingly, more disruptive. They can be triggered by a network split such as what happened in the Blocksize wars, or a new large miner coming to the network, or an attempt to double-spend transactions (this is very rare).

Most Recent Reorgs

Source: Learn Me A Bitcoin

The Bitcoin protocol and its incentives are designed so that there’s a low likelihood of deep reorgs occurring. Consensus rules and incentives are meant to keep the network stable and secure. For example, most exchanges and payment processors require that a transaction be confirmed by a set number of times—usually six or more—before a transaction can be considered final, thus greatly reducing the chances of it being unwound by a reorg. Small reorgs happen and are mundane and frequent operations within the Bitcoin blockchain, but large reorgs are notable and very irregular.

About That Epic Sat

You’ve probably heard the buzz about Ordinals, that is “a numbering scheme for satoshis that allows tracking and transferring individual sats”. Some argue that Ordinals are a scam and they have no place in Bitcoin, but here’s the thing, an emerging market is rapidly growing around Ordinals. For now, they are here, and they are getting attention from miners, devs, VC, collectors, scammers, and haters alike.

When it comes to Ordinals, they are classified by their “rarity” and markets determine value.

Ordinals rarity levels:

+ common: Any sat that is not the first sat of its block

+ uncommon: The first sat of each block

+ rare: The first sat of each difficulty adjustment period

+ epic: The first sat of each halving epoch

+ legendary: The first sat of each cycle

+ mythic: The first sat of the genesis block

If we consider the scenario where all Bitcoin has been mined, which implies that all 21 million bitcoins (or 2.1 quadrillion satoshis) are in circulation, we can calculate the total quantity of each level of Ordinals:

Uncommon: There would be a total of 6,929,999 uncommon satoshis, corresponding to the first satoshi of each block.Rare: There would be a total of approximately 3,437 rare satoshis, corresponding to the first satoshi of each difficulty adjustment period.Epic: There would be a total of 32 epic satoshis, corresponding to the first satoshi of each halving epoch.Legendary: There would be approximately 5 legendary satoshis, corresponding to the first satoshi of each cycle (noting a slight approximation due to division).Mythic: There is 1 mythic satoshi, which is the first sat of the genesis block.

These figures give an overview of how the rarity classifications would distribute across the total supply of satoshis once all Bitcoin is mined, showcasing the unique and scarce nature of certain satoshis within the Bitcoin network.

The Ordinals Market and Beyond

Over the past 12 months we’ve seen rapid development in Ordinals technology and markets. Ordinals markets first emerged in Discord back channels where OTC deals were being made, but as demand has grown, digital marketplaces have developed for buying and selling Ordinals. US Based Magisat.io lists various types of Ordinals and has Rare sats listed for a staggering 3.49 BTC. This valuation has led to the creation of additional inventory of Ordinals beyond the category that was first described in the Ordinals documentation.

Current Market on Magisat.io for standard Ordinals

Stats as of 2-15-2024

This data shows that there is a small but growing demand for Ordinals. You can see the volume for Rare amd Uncommon Ordinals are greater than 26 BTC at the time of writing this. Keep in mind that this is only one marketplace and there are a growing number of OTC deals that are happening between buyers and sellers not to mention demand and business happening in other parts of the world.

Looking beyond Ordinals marketplaces we are now seeing Ordinals make their way to legendary auction house Sotheby’s further propelling the phenomenon towards the mainstream. If you look across the Pacific Ocean there is also significant demand for Ordinals and BRC-20 tokens, which would not be possible without Ordinals. So the demand for Ordinals is real and it is growing, not waning.

The last significant item of note that could impact demand for this first block of the halving is the activation of Runes. Runes is another protocol released by the same creator of Ordinals, but the aim of Runes is to make a more efficient token protocol. The kicker on this is that with it going live in the first block of the halving, this alone will cause a significant demand to issue these new tokens as quickly as possible, presumably the first Runes issued will be more valuable than later issued Runes. “Yes there will be reorg incentive for block 840,000, but it’s not for epic sat — it’s for the 20btc in fees from Casey’s Runes.” said Charlie Spears on X. This fee revenue call is speculation but it comes from observation from previous Ordinals and BRC20 activity.

Sifting For Sats

In Bitcoin, “dust” refers to an amount of bitcoin so small that it cannot be spent because the cost of a transaction fee would be higher than the amount itself. The concept of a “dust limit” therefore varies depending on the transaction fee and the type of transaction being made. However, there are general guidelines for what is considered dust, based on the type of Bitcoin script or address being used.

The dust limit is calculated based on the size of the inputs and outputs that make up a transaction. For a transaction to be relayed by most nodes and mined, its outputs must be above the dust limit. The dust limit for a standard P2PKH (Pay-to-Public-Key Hash) transaction output is commonly considered to be 546 satoshis when using the default minimum relay fee of 1 satoshi per byte, but this can vary depending on the network conditions and the policies of individual nodes.

For different script types, the dust limit calculation takes into account the size of the script and therefore can vary:

P2PKH (Pay-to-Public-Key Hash): This is the most common type, and its dust limit is usually around 546 satoshis.P2SH (Pay-to-Script Hash): Outputs for P2SH transactions can have a slightly higher dust limit because the script itself is more complex, requiring more data to be included in a transaction.P2WPKH (Pay-to-Witness-Public-Key Hash) and P2WSH (Pay-to-Witness-Script Hash): These SegWit (Segregated Witness) transactions have different weight calculations, leading to lower fees for the same amount of data. Consequently, the dust limit for SegWit transactions can be lower than for traditional P2PKH transactions. For P2WPKH, the dust limit might be closer to 294 satoshis.MultiSig: Transactions involving multiple signatures (MultiSig) have higher dust limits due to the increased data size required to accommodate multiple signatures.

The exact dust limit can vary because it depends on the transaction’s size and the current fee market. Additionally, changes in Bitcoin’s protocol or node policies can affect these thresholds. It’s also worth noting that some wallets and services might set their own dust limits based on their operational requirements.

Pools Sifting

Based on the information above we can examine blocks found by pools to see if pools are actively sifting blocks. What we see is 44% of the network is or has sifted for sats in the past year. We have reason to believe that additional pools are in discussions with sifting technology developers in deploying the tech on their pools, but nothing has been made public at this time. Our findings reveal that a very significant percentage of the mining network sees value in sifting for these sats, otherwise this would be a hobbyist endeavor. When this many big players are participating, you know there is some market dynamics happening.

Source: Mempool.space as of 2-12-2024, ranking as of past 6 months

Beyond blockchain investigation outlined above, miners are developing new markets of their own in mining irregular transactions for various projects. Most notably is publicluy traded mining pool Marathon who launched a new service called Slipstream which will mine complex transactions such as 1 sat UTXO which is far below the SEGWIT dust threshold of 546 sats. I bring this up because as they are offering this service, you can’t help but assume that Marathon sees or will soon see value in Ordinals of they are willing to invest resources in serving Ordinal or Ordinal adjacent projects with this service. Afterall, the obligation of publicly traded companies is to maximize value for shareholders.

We know more than 40% of hashrate is sifting for sats, but what does that really mean in the grand scheme of things. Afterall, we are talking about one specific sat, the epic sat in block 840,000. We know that Ordinals have value according to the very small market, we also know that this sat will likely be sold for more than a single blocks reward, but the big question is who could forcibly win this block? Proof of Work is all about the longest chain and ethics don’t matter when it comes to Bitcoin and the blockchain. The chain is truth, even if you were to reorg. If you are hashing and following consensus and you build a longer chain then you are the victor. Based on the table from the previous section, we can see who the top pools are from the past six months. With that information we can model the probability of these pools forking and causing a reorg of the blockchain in order to win the epic sat but we need to run the numbers. For this we will explore the mining section of the Bitcoin Whitepaper.

Mining Explained in the Whitepaper

Bitcoin mining is a race to find a valid block by solving a cryptographic puzzle, known as proof of work. The difficulty of this puzzle is adjusted by the network so that, on average, a new block is found every 10 minutes, regardless of the total computing power of the network. Now the security of this is where things get interesting. Section 11 of the Bitcoin whitepaper discusses the mathematics behind the security of the blockchain against attackers who try to alter the transaction history.

The paper uses a comparison to a gambler’s “ruin problem” to explain how difficult it is for an attacker to catch up with the rest of the network once they fall behind in the race to add new blocks to the chain. Essentially, if honest nodes control more computational power, the probability that an attacker can catch up decreases rapidly as they fall further behind in the blockchain. The probability that an attacker can catch up becomes almost zero if they do not have a majority of the computational power.

The section outlines the process where transactions become more secure as new blocks are added to the blockchain, using a Poisson distribution to model the likelihood of an attacker catching up from being behind the chain tip. This framework provides the basis for understanding how blockchain achieves security through probabilistic means not absolute guarantees.

In the Bitcoin whitepaper, the Poisson distribution is used to model the security of mining. It’s used to quantify the probability that an attacker can catch up with the honest nodes after being z blocks behind, which is vital when considering the risk of a blockchain reorganization. It offers a statistical view of how likely it is for an attacker, with a certain percentage of the total network hash rate, to rewrite the blockchain history.

Converting to C code…

#include

double AttackerSuccessProbability(double q, int z)

{

    double p = 1.0 – q;

    double lambda = z * (q / p);

    double sum = 1.0;

    int i, k;

    for (k = 0; k

    {

        double poisson = exp(-lambda);

        for (i = 1; i

        poisson *= lambda / i;

        sum -= poisson * (1 – pow(q / p, z – k));

    }

    return sum;

}

Who Could Pull This Off?

Ordinals introduces a new incentive to reorg. Before Ordinals, the threat of a reorg was focused around a double spend attack, but Ordinals introduced the demand for individual sats, in this case the demand to win a specific block. The question is this, does the value of a single Epic sat or block warrant abandoning the longest chain in hopes of finding a couple quick blocks and winning that epic sat? Pubco mining pools will have a hard time justifying such action to shareholders, it seems negligent. But for private mining pools, they have different incentives and have a bit more freedom in how they pursue revenue.

Looking at the top 10 mining pools by their percent of the network, we can model out who could pull off a reorg. One thing of note, the formulas described in the whitepaper only model catching up with the chain tip, however a reorg would require catching up to the tip +1 block, so our values below show that probability.

The first thing I noticed was Foundry and Antpool have a higher % probability of pulling off a reorg from 1 block behind than their own % hashrate of the network. How could this be possible? This is because A miner with 30% of the hashrate being 1 block behind and attempting a reorg is at a disadvantage because the rest of the network (70% hashrate) collectively has a higher probability of extending the current longest chain before the miner can catch up and surpass it. However, due to the randomness captured by the Poisson distribution, there’s always a non-zero probability that this miner could, through a streak of good luck, mine enough blocks in a row to take over the longest chain, even from one block behind. This is statistically unlikely but becomes possible with higher hashrate percentages and short reorg depths.

The next key takeaway is how successful reorgs become less likely for each block they are behind. It is remarkable how Foundry could still reorg from 5 blocks behind.

Conclusion

The Bitcoin space is weird (always has been) and bitcoin miners are the longest of long when it comes to outlook on Bitcoin. Based on the reorg probability and the potential value from the additional value on the first block of the halving, the probability of a reorg feels likely. If you take the BTC mined from this block, the epic sat, plus the projected amount of fees that will be earned from the release of Runes, bigger pools would be foolish to not try and make a move to win this block. The only real downside of a reorg would be by working on the old chain and NOT winning the reorg, so you would miss out on possibly winning 1-2 blocks by mining on the original longest chain. I do hope for fireworks. It will be legendary to hear the talk tracks from the new Wall Street financial bros trying to explain this. At the end of the day, miners will have to make a decision, that is to simply build on the longest chain or to try and build the longest chain with heavy amounts of luck. They must consider the tradeoffs and pick their poisson.

CODE

===========REORG-SUCCESS.RB=========================================

# —-

# Data

# —-

miners = {

‘    foundryusa’ => 30,

    ‘antpool’ => 25.64,

    ‘f2pool’ => 12.35,

    ‘viabtc’ => 10.98,

    ‘binancepool’ => 6.49,

    ‘marapool’ => 3.78,

    ‘luxor’ => 2.93,

    ‘sbicrypto’ => 1.90,

    ‘btcdotcom’ => 1.54,

    ‘braiinspool’ => 1.29,

    ‘unknown’ => 1.27,

}

# ——–

# Equation

# ——–

def attacker_success_probability(q, z)

    # p = probability honest node finds the next block

    # q = probability attacker finds the next block

    # z = number of blocks to catch up

    p = 1 – q

    lambda = z * (q / p) # expected number of occurrences in the poisson distribution

    sum = 1.0

    for k in 0..z

    poisson = Math.exp(-lambda) # exp() raises e (natural logarithm) to a number

    for i in 1..k

        poisson *= lambda / i

    end

    sum -= poisson * (1 – (q/p)**(z-k) )

    end

    return sum

end

# ——–

# Results

# ——–

# Run through each of the miners in the list

miners.each do |miner, percentage|

    # Print miner name

    puts “#{miner}”

    # Convert percentage to probability

    probability = percentage / 100.0

    # Calculate their success of replacing a different number of blocks near the top of the chain

    1.upto(5) do |blocks|

    # NOTE!

    # Add 1 to the number of blocks.

    # This is because we don’t want to calculate the probability of merely catching up to the tip of the chain (which is what the equation calculates).

    # To perform a successful attack, we want calculate the probability of building a chain that is ONE BLOCK LONGER than the current chain. That way, other nodes will be forced to adopt it and we will have successfully rewritten the blockchain.

    # Calculate success for specific number of blocks based on their hash share

    success = attacker_success_probability(probability, blocks+1)

   # Convert probability to percentage

    success_percentage = success * 100.0

    # show results

    puts ” #{blocks} = #{“%.8f” % success_percentage}%”

    # NOTE: The %.8f converts from scientific notation to decimal

    # Adjust the number (e.g. 8) to control how many decimal places you want to show

    end

    # Add gap between results for each miner

    puts

end

This article is featured in Bitcoin Magazine’s “The Halving Issue”. Click here to get your Annual Bitcoin Magazine Subscription.

Originally published on Unchained.com.

Unchained is the official US Collaborative Custody partner of Bitcoin Magazine and an integral sponsor of related content published through Bitcoin Magazine. For more information on services offered, custody products, and the relationship between Unchained and Bitcoin Magazine, please visit our website. 

There are many different ways to custody bitcoin, and there isn’t one perfect method that suits everyone in all situations. The amount of bitcoin, the frequency it needs to be accessed, and other factors can determine which approach makes the most sense.

The resources and security requirements of individual bitcoin holders will differ from those of institutions. In this article, we’ll take a look at how the custody strategies for these two groups compare, and then uncover an important truth about the application of multisig.

Custody for individuals

For typical individuals looking to hold bitcoin in self-custody, there are a number of tools to choose from. Depending on the situation, a simple singlesig wallet could be sufficient, with the option to add modifications such as seed phrase copying or BIP 39 passphrases. We created an article going into detail on various configurations, comparing their strengths and weaknesses.

Individuals less concerned with making frequent withdrawals, and looking to secure larger amounts for long-term savings, should consider a multisig wallet. Multisig offers threshold security, which can protect users from single points of failure, ensuring that no funds are lost if any one component of the setup is destroyed, misplaced, or stolen. Achieving threshold security is crucial for anyone who wishes to protect a substantial amount of funds.

Use code “btcmag” for $100 off Unchained IRA + 1 year free of Bitcoin Magazine Pro market research. Click here to hold the keys to your retirement using Unchained’s collaborative custody financial services.

There are a couple of other methods of threshold security besides multisig, but they are less appropriate for the average person. Shamir’s secret share (SSS) is one method that still leads to temporary single points of failure during the initial setup, and during a withdrawal procedure. Multiparty computation (MPC) is another method which is extremely complicated to safely use. You can learn more about these in our article about threshold security models.

Multisig can be combined with SSS or MPC to create multi-level thresholds. Multi-level thresholds refers to a threshold on the blockchain level (multisig) as well as a threshold on the key level (SSS or MPC). By combining these concepts, a fundamental threshold of keys serves as the primary security for bitcoin holdings, and each key can have protection from becoming compromised by using a threshold of its own. Despite a more complicated structure, two levels of thresholds offers clear advantages for keeping bitcoin maximally secure.

For a sole individual trying to protect their bitcoin, this approach is widely considered unnecessarily complex. However, if the individual enters a collaborative custody partnership with one or more institutional key agents capable of deploying SSS or MPC, this increased layer of security becomes more easily accessible.

Lone individuals holding bitcoin have several reasonable options, including single-level threshold security. Multi-level thresholds are unnecessarily complex unless a collaborative partnership is involved.

Custody for institutions

For companies, governments and other institutions who want to secure a bitcoin treasury, it wouldn’t be appropriate to employ some of the custody strategies used by typical individuals. If multiple people are responsible for large sums of money, more rigorous controls are necessary. Institutional-grade bitcoin custody requires threshold security as a bare minimum.

Multisig, SSS, and MPC are the available choices to meet that requirement. While MPC is by far the most complicated to safely use, and wouldn’t be recommended for individuals, an institution with a team of experts might consider it. However, the extra effort to set up MPC doesn’t mean that it’s a superior option to basic multisig. All three models have trade offs, as discussed in our earlier article comparing them.

If an institution wants the highest level of security possible, they should consider using multi-level thresholds. In this arrangement, the foundation is multisig, which allows for a threshold of multiple separate private keys in order to access funds. Several different enterprise key agents can be responsible for each key, minimizing counterparty risk from any single custodian. Additionally, each key agent can apply their own threshold security for the key they are responsible for, by using SSS or MPC. This protects the key from any single officer within the key agent firm.

Institutions would be unwise to use a custody model lacking threshold security for their bitcoin treasury. There are several threshold options to choose from, and for the utmost security, they can be combined to form multi-level thresholds.

Multisig has a higher security ceiling

As you may have noticed from the charts above, there is a distinct difference between the upper security limits of singlesig and multisig. With singlesig, there is only a single key which can have a threshold applied to it, creating a single-level threshold. Multisig can act as a single-level threshold as well, but also travel a step further: it can be the foundation of multi-level thresholds.

Therefore, sizable bitcoin holdings that utilize a singlesig foundation rather than a multisig foundation—which can often be observed by examining the address type—have an opportunity for a security upgrade. Multi-level thresholds can unlock a robust multi-institution custody structure that distributes risk across key agents. Unchained private wealth and enterprise clients have several high-end key agents to choose from in order to set up this structure. Learn more and book a consultation!

Originally published on Unchained.com.

Unchained is the official US Collaborative Custody partner of Bitcoin Magazine and an integral sponsor of related content published through Bitcoin Magazine. For more information on services offered, custody products, and the relationship between Unchained and Bitcoin Magazine, please visit our website. 

SATOSHI’S THOUGHT PROCESS

Have you ever wondered what it must have been like for Satoshi Nakamoto back in 2008 when he published the Bitcoin Whitepaper? Spending countless hours in solitude, meticulously writing the code that would bring the world its first-ever successful attempt at creating a truly decentralized monetary network, the first of which our species has ever had the privilege of experiencing. The pseudonymous creator’s thought process is one we can’t picture – laying out Bitcoin’s framework and ironing out the innovation that is the network’s distributed ledger, the complex mining process that secures it. And then, one of the most fundamental, yet underappreciated, pieces of Satoshi’s design was the pre-coded, fixed supply schedule with a 50% reduction in new issuance that happens quadrennially – the Bitcoin halving.

Hard-coded into Bitcoin’s core, this deflationary event called “the halving”, which enforces the reduction in the supply of the bitcoins being introduced into circulation, is undoubtedly a crucial technical element of the protocol and was a foundational design choice. The creation of a digital currency that would maintain its scarcity and by extension its value, over the long term. A digital currency that would exist beyond the reach of central banking policies and the whims of the hands that control them. That was Satoshi’s idea. And to properly execute this, it had to have a pre-programmed finite supply of 21 million units, with an engineered supply compression mechanism that gradually slows down the rate of issuance of new coins in a four-year cycle. I’m not going to get into too much detail about the Bitcoin halving and its technical aspects, because a lot of brilliant minds have already talked extensively about it, so why reinvent the wheel? Rather, let’s take a few steps back in time.

15 YEARS AGO

Let’s go back a decade and a half, back to those grueling hours Satoshi Nakamoto must have spent working on Bitcoin. Hunched over, working tirelessly on the code, integrating the halving and all it was meant to represent for the network as a mechanism that ensures the long-term scarcity of this new digital currency. Theoretically, he must have known the profound impact the halving would have on the fiat value of Bitcoin. I mean, considering basic economics and how scarcity inversely correlates with value, it couldn’t have been hard to derive that conclusion. However, is it possible that he could have anticipated the significant cultural influence this pre-programmed technical process would take on?

In those early days, the Bitcoin community was a tiny one, comprising merely thousands globally – a few cypherpunks here and there, coders, and a handful of libertarian idealists tinkering in home offices, basements, and dorm rooms, securing the network while earning those block rewards. Unaware, of course, of the frenzy and excitement that would one day surround each approaching halving.

And yet, that obscure, humble beginning, was about to birth a cultural phenomenon unlike anything those first few miners nor even Satoshi could have envisioned. With the gradual emergence of Bitcoin into mainstream consciousness over its 15 years of existence, the 4-year hard-coded algorithmic ritual morphed from mere technicalities of a program, into a global celebration – an event that unifies Bitcoiners worldwide, no matter their creed, race, and political ideology and all other superficial ethnocultural and socio-economic classifications we have created – eagerly anticipating, planning parties, that have now come to mark the progression of this monetary revolution.

FROM MACRO EVENT TO QUASI-HOLIDAY

The once arcane, behind-the-scenes process of miners receiving fewer freshly minted bitcoin, blossomed into a veritable quasi-holiday for Bitcoiners and Cryptography enthusiasts. With its gradual emergence from the fringes, from the darker corners of the internet back in the days when it used to be seen as a tool for hackers, unscrupulous individuals, and bad actors, Bitcoin gained mainstream awareness, enabling the halving to take up a seemingly mystical significance. It became not just a routine supply shock in BTC issuance, but a chance for Bitcoiners around the world to unite in their shared commitment to a monetary protocol that at its foundation, possesses the core principles of decentralization, limited supply, and independence from government manipulation.

As we approach the 2024 halving – depending on when you’ll be reading this – it has become curiously impossible to ignore the growing cultural significance of this event. Halving countdowns have now become a recurrent element on social media. Bitcoin and Crypto news platforms, as well as mainstream media outlets and other financial news platforms, have published reports about the halving over the past few months. And then there are events and parties scheduled throughout April 2024. At these events, Bitcoiners will gather for halving-themed parties and events across the globe – from a “Bit-Rave” festival in San Salvador to themed happy hours in the pubs of Bedford, UK, and even a lakeside gathering in the California desert. There’s even talks of a bitcoin halving festival being held in Calabar, Nigeria. It’s a fair bet that there must be a bunch of other such events either already past, or scheduled to hold within the month somewhere in the world.

Though admittedly not all of them are exactly “halving parties”, but, the fact that they are all scheduled for April when we expect the confirmation of the 840,000th block, tells all.

CEMENTING SATOSHI’S VISION FOR SCARCITY AND DECENTRALIZATION

As we look ahead towards the 2024 halving considering what it has grown to be these past decade-plus, one question comes to mind; will this quadrennial event continue to hold such profound significance? Bitcoin’s identity seems to have formed its base around the halving. It seems to have been ingrained in such a way that Bitcoin, as we know it today, will not be what it is without the event. That much is clear. It creates a reliable, as well as a predictable cadence for Bitcoiners to gather in a shared celebration of the protocol’s core ethos. Each iteration reinforces the network’s commitment to true digital scarcity, decentralization, immutability, and censorship resistance – the very principles that drew early adopters to this monetary revolution in the first place. The very same principles on which Satoshi’s vision – not the flawed BSV fork though – is based.

The halving can be said to be a self-fulfilling prophecy – each supply squeeze is expected to drive up bitcoin’s price, thereby further cementing its place as a store-of-value asset that transcends time. This “prophecy” has enabled analysts, traders, and institutions to develop entire frameworks around the halving’s anticipated impact. Which further emphasizes the point earlier alluded to; that it is ingrained in Bitcoin’s identity. This weaves it into the cultural fabric of the digital currency in a way that transcends its origins as merely a technicality.

CONCLUSION

As the 2024 Bitcoin halving approaches, its ever enduring significance may lie in its ability to consistently remind Bitcoiners of the network’s unwavering principles. In an era marked by rapid technological shifts and widespread social upheaval, the halving’s reliability and unchanging nature provides a sense of stability – a guidepost – so to speak – for this movement.

The halving serves as a totem, a rallying cry that unites Bitcoiners in their commitment to this monetary revolution, regardless of the fluctuations and disruptions that are unavoidable in the world we live in today. It will remain a quadrennial occurrence that will continue to hold an honored place in Bitcoin culture, reminding us of each passing cycle of the network’s unshakable principles and the unstoppable force of Satoshi’s infallible creation.

This event, this beacon of hope in unsettling times, represents an enduring constant, a touchstone that reinforces the immutable foundations upon which the Bitcoin network is built. As the celebrations surrounding the 2024 halving reach a fever pitch once more, we can be certain that this tradition will remain a vital part of the Bitcoin movement, serving as a guidepost for adherents weathering the storms of a rapidly changing technological, social landscape, geopolitical uncertainties, and global economic maelstrom.

This is a guest post by Emeka Ugbah. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

First, 50.

Then, 25.

Eventually, 12.5.

After that, 6.25.

And now, 3.125.

Four halvings later, we enter the fifth of 33 epochs of Bitcoin. The first 32 epochs, in Bitcoin-terms, last 210,000 blocks, with the 33rd lasting until the heat death of the universe.

At 10 minutes per block, on average, that means just about every four years, Bitcoin cuts its supply issuance in half. The specific numerical finite-ness that comes downstream of this mechanism –– that defines bitcoin’s scarcity in a nearly infinite universe –– is ultimately irrelevant. Satoshi could have started at a 100 bitcoin block reward and we would have arrived at just about the same place today. But there are some statistical conveniences of starting at 50, such as that 50% of all bitcoin to ever be issued are during the first epoch. And thus, 25% of all bitcoin to ever be issued were issued in the second, and so on, and so forth.

Speaking of fourth, the fourth epoch terminates in the fourth month of 2024 at the completion of the fourth halving at block 840,000. A lot happened the fourth time around: El Salvador making bitcoin legal tender, Wall Street’s ETF play, the Taproot-enabling softfork, and even Ordinals.

Every new halving brings up the legitimacy of cycle theory, of whether or not supply issuance can be “priced in”.

Each halving is a time of self-reflection for bitcoiners and the culture they curate. Not only is Bitcoin arguably no longer a counter-culture with nation-state and Wall-street adoption (co-option?), but it is no longer a mono-culture. While many things were born during this epoch, it is perhaps the death of the homogenous bitcoiner that is the most apparent.

Bitcoin is for anyone; Salvadorans, Larry Fink, Bored Apes, and ESG’ers.

Welcome to the Fifth Epoch.

The Editors

While to the greater Bitcoin culture, Bitcoin halvings are seen as a celebratory event, for miners, things tend to be a tad stressful. As Bitcoiners around the world gather to celebrate block 840,000, miners are hunkering down and preparing for their reward for mining blocks to decrease by 50%, while the cost of their operations remains the same.

With the next bitcoin halving scheduled to occur on April 19, one might imagine that Fred Thiel, CEO of Marathon Digital Holdings, the largest publicly-traded Bitcoin mining company in the world, might be worried. But after sitting down with Thiel just days before the halving, he doesn’t appear to be breaking a sweat.

Why’s that?

One of the reasons is that Marathon plans to generate alternative streams of revenue utilizing the heat emitted from its bitcoin mining rigs.

“Bitcoin mining in and of itself does something very efficiently, which is produce heat,” Thiel told Bitcoin Magazine. “50% of industrial energy spend is spent to heat things, so imagine if you could capture the heat from Bitcoin miners and Bitcoin miners could get paid for that. That would subsidize their cost of electricity.”

During a fireside chat with Senator Cynthia Lummis (R-WY) at the Bitcoin Policy Summit, held on April 9, 2024 in Washington, DC, Thiel shared an example of how Marathon plans to utilize the heat its miners produce.

“One of the things we’re doing in Nebraska actually is we’re starting to heat greenhouses and do shrimp farming using the heat from Bitcoin mining as a byproduct,” Thiel explained to Senator Lummis.

“I think you’re going to start seeing this as a way for people to grow proteins in areas of the disadvantaged world,” he added.

Utilizing the heat Marathon’s miners produce is one of the ways in which Thiel is looking to change the perception of Bitcoin mining from something that’s parasitic to something that’s productive.

This dovetails well with the fact that Marathon continues to improve its ability to use waste gas as fuel for its miners.

Toward the end of 2023, Marathon launched a pilot project in which it mined bitcoin with energy derived solely with landfill methane, a gas that’s 80x more potent as a greenhouse gas than CO2.

The project was a success, according to Thiel.

“It was a proof of concept that showed that you could successfully mine bitcoin using landfill methane gas,” he told Bitcoin Magazine. “Mining on landfills is very hard, but we were able to prove that you could do it quite successfully.”

Thiel expanded on these efforts in his conversation with Senator Lummis, tying together the ideas that Marathon could produce this heat it plans to use while having a positive impact on the environment.

“You generate energy with that by turning it into methane and then converting that into electricity and you create heat with the electricity,” he told Senator Lummis. “If you can take a waste product, turn it into energy and feed heat back into an industrial process, you do more for the environment than a lot of environmentalists want. And at the same time, your cost to mine bitcoin becomes very small because your energy cost is low.”