Thread by @SCBuergel

The Bitcoin halving is commonly perceived as #NumberGoUp

But isn't it more of a #SecurityGoingDown meme?

Let's look at the fundamentals and some actual numbers:

Proof of work provides consensus-layer security for Bitcoin

PoW relies on miners to actually run infrastructure

That costs money which miners must earn somehow

Miners make money by

(1) block rewards, which are cut in half every 2 years and

(2) transaction fees, hopefully increasing to compensate (1)

Miners also make more money if (3) the Bitcoin price rises

If (1 + 2) * 3 goes down, miners go out of business

As that would reduce the security, let's look at the numbers:

Since I didn't find charts on this, I assembled data using Google BigQuery and the public data set `crypto_bitcoin` which is basically the Bitcoin blockchain

cloud.google.com/blog/products/…

SELECT * FROM (
SELECT
block_number,
block_timestamp,
AVG(output_value / 100000000)
OVER (ORDER BY block_number DESC ROWS 999 PRECEDING)
FROM `bigquery-public-data.crypto_bitcoin.transactions`
WHERE is_coinbase = TRUE)
WHERE MOD(block_number, 1000) = 0

This gathers block number, timestamp, coinbase value

I reduced the data by averaging over 1000 blocks

Next, I exported that into a Google Spreadsheet

docs.google.com/spreadsheets/d…

Here I visualize average coinbase values over time

Generally we see that tx fees are insignificant

Some exceptions are high utilization periods during 2017

So rewards are decreasing and tx fees not making up for it

Is an increase of BTC price compensating halving rewards?

Let's add some historic price data to the chart

Here I copy-pasted historic data from @blockchain

3 day resolution needs a simple LOOKUP in Google Sheets

docs.google.com/spreadsheets/d…

Unsurprisingly, Bitcoin coinbase values drop 50% upon halving

This is compensated by price increases within a few months

That's how miners (and Bitcoin security) survived so far

Unfortunately price increases are not sustainable

Long-term BTC cannot go up indefinitely

Let's I hope that fees will start working at some point