UW Blockchain Center Anticipates Bitcoin Halving Next Week

A significant impact on bitcoin and the broader digital asset market will occur following the anticipated bitcoin halving this month, says Steve Lupien, director of the University of Wyoming’s Center for Blockchain and Digital Innovation (CBDI).

“When bitcoin was first created, miners were competing with one another to add hash power to the network and, approximately every 10 minutes, a new block is written,” Lupien says. “The reward for that new block, called a block reward, was initially 50 bitcoin.”

Since bitcoin’s launch in 2009, there have been four halving events, reducing the block reward from 50 to 25, then to 12.5 and currently to 6.25 bitcoin. The upcoming event, expected to occur by Friday, April 19, will further reduce the reward to 3.125 bitcoin per block.

The importance of the halving is due to the reduced amount of new bitcoin that will be mined.

“The value of bitcoin is driven considerably by the fact that it is a scarce resource,” Lupien says. “Throughout history, value has been driven by scarce resources, such as gold.”

He says the impact of the halving is connected to the principle of “stock to flow,” a ratio that compares the existing supply of a commodity to the amount of new inventory introduced into the system.

“Gold has maintained a pretty stable stock to flow throughout history, somewhere between 1.5 percent and 2 percent, which is why it continues to have value,” Lupien says.

The upcoming bitcoin halving event is particularly significant because, for the first time in history, an asset with a more favorable stock to flow than gold will be available, he adds.

“I don’t know what that means because we have never had anything in our history that has had a more favorable stock to flow than gold,” Lupien says. “Some interesting things are going to be happening.”

Refraining from predicting the impact of the halving event on bitcoin’s price -- as he is not a financial adviser -- Lupien says the public should follow “stock to flow” as an indicator of an asset’s value. He adds that the increased scarcity of bitcoin following the halving is expected to drive significant interest and potentially influence the value of the cryptocurrency.

“Stock to flow is a very, very telling indicator of the value of something,” he says. “So, keep an eye out, and I think we are going to see some pretty exciting things.”

To inform the public and help bitcoin enthusiasts monitor the halving event, the UW Blockchain Club is sponsoring a free countdown bash starting at 5:30 p.m. Monday, April 15, in the lower level of the Wyoming Union. The club will present an introduction to blockchain, a countdown clock, games, food and drinks.

For a video presentation about the bitcoin halving, visit www.uwyo.edu/cbdi.