It will happen 2031/2032, when the halving is expected to change the block reward from 1.5625 to 0.78125 BTC / block. In 2030, the inflation of the total supply of Bitcoin will be about 0.4%, which is not a whole lot.
Market dynamics surrounding the price will have changed: First, the supply shock produced after earlier halvings will have near disappeared, as the change in supply at each halving is exponentially decreasing. So despite what emerges from any of Plan B’s public facing sphincters, there’s not going to be a supply shock causing a 10X. Sorry. Further, by this time, if Bitcoin is still around, financial institutions will be there to make sure to arbitrage any price swings.
So the halving will have a tiny effect, and that tiny effect will be priced in.
Further, if the “Bitcoin-incentivizes-green-energy” argument is to be taken seriously, market mechanisms will have begun forcing mining profits to be quite small. This is necessary to force the inefficient miners out of the system. So no longer will miners be making 200% ROI, they might be making 10% or 20%.
So as 2032 approaches, the miners will see that their revenues are about to be cut in half. (Yes, you’re right: I’m ignoring fees… if fees can pick up the slack this situation can be averted, but fees are showing no signs of heading this direction.) While the revenue is going to be cut in half, the costs will not, in particular capital costs. So miners will be facing a period of time where many if not all are unprofitable, posing a number of security issues for Bitcoin.
Also, by 2031 it won’t just be a few people with s9s in their basement: mining is competitive, remember, so it will be largely performed by corporations squatting on cheap energy and supply chain contracts, all motivated by profits at a large scale. The CEO of one of these corporations will call a meeting with the CEOs of the others, and they will come to a very obvious and simple proposal: No more halvings.
Now this won’t be a guy named Gavin meeting with a few people in a hotel conference room, this will be major CEOs of large companies, meeting in a board room in the top floor of a building in one the world’s financial centers, accompanied by corporate lawyers, economic and game theory consultants, PR consultants, lobbyists, regulators and lawmakers.
They will come up with a proposal, they will publish it, and tell people that’s how it’s going to be.
Now of course, some people will resist. Michael Saylor might go on CNBC to describe how Bitcoin solves the Navier-Stokes equation, or whatever, and people with 20,000 sats will scream into whatever social media they’re using about inflation censorship resistant something something.
But on the other hand, this proposal will be created by large multi-national corporations with a lot of a sway, they will also have hired PR firms to work every level, from Tik-Tok influencers to Very Serious People appearing on financial media to remind the general population that although the 21 million was a fantastic idea to bootstrap the network, and the halvings created a cyclical effect that drew people in, ratcheting the network participation up, these dynamics are no longer adaptive for the network, and it’s time be serious, folks, 0.40% inflation isn’t going to destroy the narrative, but will keep the network secure and the price on a more steady trajectory, and after all that’s all we really want, right?
At the same time, whatever agreement is hammered out by the corporations, it will include a fund or some sort of commitment by a significant piece of the hashrate to repeatedly perform reorgs on the “classic” chain, if this continues to exist.
Now this is where is gets fun. The new proposal will insure that the only difference between “classic” Bitcoin21 and the “new” Bitcoin∞ is the block reward — the coinbase transactions retain the same reward after the halving. All other transactions are untouched. So a transaction on one chain will represent a transaction on the other. So most transactions will appear identical, with the exception that transactions sourcing from the coinbase transactions will now be incompatible. This will represent a very small fraction of the supply. So unless you’ve gone out of your way to enmesh your UTXOs with coinbase transactions after the fork, your Bitcoins are identical. So you won’t be able to send someone only your “classic” Bitcoin21, nor will you be able to sell your bastardized Bitcoin∞ and retain the Bitcoin21. To combat this, the “classic” Bitcoin supporters could band together and create their own fork — but this negates any homefield advantage they would have enjoyed, as now they are the ones forking the network and splintering off a new chain.
So where does that leave us? Now there’s two chains, one which is granting miners 1.5625 rewards in coinbase transactions, and one which is granting miners half of that. BUT THE NODES!!! Right. But who are the nodes? The nodes are the major corporations transacting in Bitcoin. This includes the exchanges, the banks, any and all financial institution who are accepting Bitcoin as payment. What do they want? They want security and continuity — they’re not worried about the difference between a coin with 0.4% inflation and 0.2% inflation — they want the transactions to go through, to be confirmed, settled, and not be reorged. So they will opt for the chain with the largest hashpower. Of course, these corporations will probably also have been included in the conversations the with the miners the whole time. If your business depends on Bitcoin transactions going through, and being settled, you’re going find a chain that doesn’t have such guarantees completely unacceptable and unusable. This will be a no-brainer.
But what about the guy with a Rasberry Pi? Whatever. This person can sit in their basement repeating “invalidate-block” every time they see a fishy block or new reorg show up on the classic network, but this will be a pointless endeavor. The majority doesn’t even have to wage an “empty block” attack- just process valid transactions in different blocks or in different orders. Because the majority hashpower can reorg the Bitcoin21 chain at will, there will be an array of different opinions as to which reorg is correct, completely destroying the possibility of consensus. This is why we have a longest chain rule in the first place, because you need it in order to come to consensus.
So with no consensus on the classic network, any nodes that want to remain relevant will switch to Bitcoin∞. Miners are double motivated to join — by joining the functioning network, their reward not only doubles, but has a much smaller chance of being orphaned out of existence. So it’s a no-brainer for them as well.
The only people who possibly stand to lose from this are those who are worried about 0.4% money supply inflation. (Actually, as time goes on, it will become smaller than this, because the block reward stays the same while the total supply grows: there’s no compounding.) So the net effect is that 20 years in the future the total supply will have increased 8%, hardly an issue. The tradeoff of 0.4% is a small price to pay for a more secure network.