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The Entire Blockchain Ecosystem in One Visualization

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The Blockchain Ecosystem: View the full-size infographic
The Blockchain Ecosystem

The Entire Blockchain Ecosystem in One Visualization

View the full-size version.

The size of the bitcoin market may still be microscopic when contrasted with other global markets, but that hasn’t stopped the eight-year-old cryptocurrency, as well as the surrounding blockchain ecosystem, from evolving.

As Bitcoin Magazine points out in its article accompanying this infographic:

As Bitcoin approaches its eighth birthday, we see things changing. It is turning into that curious, wide-eyed technology with ideas as widespread as any normal eight-year-old. Cross-border payments, machine-to-machine transactions, smart contracts, microtransactions and stock settlements all have been discussed and developed. Nothing is off limits; no question goes unasked.

The blockchain, which is the technological infrastructure behind how Bitcoin transactions work, is now much more heralded in many circles than the original cryptocurrency itself. That’s because it is now clear how the blockchain can be further applied to many other disciplines, including payments, trading assets digitally, identity management, data verification, and smart contracts.

Venture capital has continued to pour into the sector to untap this potential.

In 2015 alone, companies focused on Bitcoin or the blockchain raised over $1 billion. Meanwhile, 2016 has already seen notable investments in companies like Augur, a decentralized prediction market, or Ethereum, a smart contract and publishing platform. As of today, than 65 banks and financial institutions have made investments in the industry in a wide range of businesses and ideas.

We pointed out in last week’s chart that mentions of “Bitcoin” have decreased by 61% in Y Combinator applications, which does raise a potential concern for the development of future Bitcoin and blockchain technology. Less startups focusing on the applications of the blockchain could be a sign of a slowdown, but it could also be temporary. Any significant breakthrough, like the anticipated success of OpenBazaar, could tip the scales back in favor again.

Even despite this potential setback, Bitcoin has always done well in the face of adversity. It was the top performing currency of 2015, and recently the bitcoin price has soared to 21-month highs after a recent four-day rally of 21%.

Based on this, it would seem that the blockchain ecosystem, including Bitcoin, is still alive and well.

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Bitcoin

The 4th Bitcoin Halving Explained

We take a deep dive on historical Bitcoin data from Coinmetrics to see what lessons the 3 previous halvings might have for the future.

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Area graph showing the historical price of Bitcoin in USD with a look ahead to the upcoming 4th halving.

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The following content is sponsored by HIVE Digital

The 4th Bitcoin Halving Explained

Sometime in April 2024, the reward that cryptocurrency miners receive for mining bitcoin (BTC) will go from ₿6.25 to ₿3.125, with significant consequences for the world’s most valuable digital currency.

To help understand this quadrennial event, we’ve teamed up with HIVE Digital to take a deep dive on historical bitcoin data from Coinmetrics to see what the three previous halvings might tell us about the fourth.

Bitcoin Explained

But to understand halvings, we first need to take a step back to talk a bit about how the Bitcoin network works.

Unlike fiat currencies like the U.S. dollar or the Chinese yuan that are backed by central banks, cryptocurrencies are supported by an underlying blockchain, which contains a record of every single bitcoin transaction in a public decentralized, distributed ledger. 

When you spend a bitcoin, a digital record of that transaction needs to be validated and added to the blockchain. And this is where miners come in. They legitimize and audit bitcoin transactions, and as a reward, receive bitcoin in payment.

Halvings Explained

Now, quantitative easing notwithstanding, you normally can’t keep printing money forever without running into hyperinflation (think 1920s Germany or 1990s Argentina).

To get around this problem, the Bitcoin network has a pre-programmed upper limit of 21 million, with the reward that miners receive decreasing by half (hence, halving) roughly every four years. 

Line graph of the value of the Bitcoin subsidy against the Bitcoin supply against the 32 pre-programmed halvings showing that as the supply approaches the 21 million limit, the subsidy approaches zero.

When the Bitcoin network first launched, the reward was initially set to ₿50, an amount that was high enough to quickly increase the money supply and incentivize miners to participate in the validation process. On November 28, 2012, that reward decreased by half to ₿25, then to ₿12.5 on July 9, 2016, and on May 11, 2020, to ₿6.25.

The last halving will happen sometime in 2136, with the reward decreasing to ₿0.00000001 or one satoshi, the smallest denomination of bitcoin possible. The last bitcoin will enter circulation four years later, in 2140.

Halvings and Miner Revenue

With the fourth halving just around the corner, some have wondered whether mining will still be sustainable. Modern mining operations today are costly endeavors, often with razor-thin margins, and losing half of one’s revenue overnight would be a nightmare for any business. 

Area graph comparing miner revenue in USD and in Bitcoin, showing that the price of Bitcoin appreciates after each halving.

And if you look at historical miner revenue in bitcoin, you can see quite clearly, the steep drop in revenue after each halving. But what’s interesting, is that if you compare that against the miner revenue in USD, there is a drop there as well, but it recovers soon thereafter as the cryptocurrency appreciates. In other words, a miner may receive less bitcoin, but that bitcoin is worth more.

Halvings Compared

So we know that the network will continue to function after the fourth halving, but what else can we learn from previous halvings? 

If we look at the percent change in market capitalization post-halvings, we can see a bit of a pattern. After both the second and third halvings, market capitalization peaked at around the year-and-half mark. The second-halving peak occurred on day 526 at around $328 billion, an increase of 3,000%, while the third-halving peak came three weeks later on day 547 at over $1.2 trillion, or an increase of just under 700%. 

Line graph comparing the percent change in market capitalization following the second and third halvings, showing that there is a price peak at around 1.5 years post-halving.

The post-first-halving peak happened a bit earlier, at the 372-day mark, but because the peak was so high (over 10,000%!) it is considered an outlier, and omitted to better illustrate the trend.

The 4th Bitcoin Halving Projected?

Because we know that halvings occur every 210,000 blocks and that each block takes around 10 minutes to mine, we have a good idea of when the fourth halving should happen: April 21, 2024. If the next halving follows the same pattern as the previous two, then there could be a market-capitalization peak some time during the third week of October 2025.

And with the price of bitcoin setting new records at time of writing, a lot of people will be watching very closely, indeed.  

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