How can alt-coins exploit the Bitcoin halving?

Every blockchain associated site is currently exploding with count-down-clock and hype. The bitcoin halving is coming – and even the Covid-19 news can not compete for the headlines.

The term “halving” refers to a programmed-in event in bitcoin’s code, which reduces the reward per block mined by 50% every four years to control inflation. Following the upcoming halving, rewards issued will drop to 6.25 BTC from the current 12.5 BTC.

The halving was hardcoded into the system by its creator(s), Nakamoto. The idea is to reduce inflation and slowly reduce mining cost. In 2040 after 64 halvings, the reward for mining is transaction fees solely.

In other words, the transaction fees will rise. How else will the miners be able to afford their server farms and electricity bills? If Bitcoin was scalable, this would not be a problem; unfortunately, Bitcoin is not. So miners will accept those blocks with the most substantial transaction fee and disregard the small fees for the small transactions.

The following gif is an excellent picture of what will happen if more and more people move to Bitcoin as a transaction network. Everyone wants to pay with Bitcoins.

In the extreme case, this would mean that the poor guy who wants to pay for a coffee at Starbucks using Bitcoins could wait ten years for his payment to go through. You do not need a doctors degree to see what this means for Bitcoin as an everyday payment option.

Or to quote Nakamoto him/her/themself:
"In a few decades, when the reward gets too small, the transaction fee will become the main compensation for nodes. I’m sure that in 20 years there will either be very large transaction volume or no volume."

Bitcoin payments will only be timely and cheap for big transactions. A bit like a container ship. It makes financial sense to ship a full load of containers. But a ship with very little cargo will not even leave the harbour.

So who will be the financial last-mile-deliverer of the future? What system will our friend at Starbucks use to get his coffee while it is still hot? Well, the local fiat-currency, of course.

Only two things could change that:

The local currency has crashed.
An unlikely scenario for some - a likely scenario for others.

Expectations of a dollar drop are still rising, with analysts claiming its meteoric rise is unsustainable amid huge Federal Reserve stimulus and other pressures.

The U.S. dollar index shows the greenback continuing to rise against a basket of major currencies.



The other scenario is that an alt-coin comes in and offers all that Bitcoin can not:
• Transaction speed that is on pair with VISA and other providers.
• Smooth payment directly from the phone
• Lower transaction fees than the competition

With a global payment market that has a forecast of $2 trillion business this year the race is on…

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