Bitcoin’s infinite paradox: Halving, renewables, and the race to value

Imagine racing a tortoise: Though it starts ahead, you’re faster. Imagine you must reach the tortoise’s origin before passing it. Each halfway point leaves more to go. The philosopher Zeno argues that Achilles must travel half the distance before reaching the tortoise’s starting point.

Before covering half the distance, he must cover a quarter, and so on. This process can be divided infinitely, requiring Achilles infinite steps. According to Zeno’s philosophy, this is a continuous cycle. It loops endlessly. Bitcoin, to some extent, follows the same model.

Now, let’s delve into the intricacies of Bitcoin and how it operates. With Bitcoin’s fourth halving approaching, the reward for miners will soon be reduced from 6.25 BTC per block to 3.125 BTC. This reduction occurs approximately every four years, after every 210,000 blocks. Miners also receive a small transaction fee in addition to the block reward. Now, let’s consider whether Bitcoin has a finite or infinite supply.

There will only ever be 21 million Bitcoins, the very first cryptocurrency in the world. This differentiates it from traditional fiat currency, which can be continuously minted. The deviation from the conventional norms adds value to Bitcoin. Although bitcoins have a finite supply, they can be further subdivided into satoshis, minuscule units that can be utilized in various transactions, essentially turning the total supply virtually infinite.

The mining process used by Bitcoin is based on the idea of infinity, with difficulty recalibration maintaining a constant block creation pace. Miners compete to solve challenging puzzles, with a recurring halving of the reward. Due to transaction fees, mining would remain profitable for the appropriate mining power in the proper difficulty adjustment even if the block reward fell to zero.

As the mining reward approaches zero but never completely vanishes—bitcoin will always be transferred, and there will always be miners—this system is reminiscent of Zeno’s Achilles and the tortoise paradox. With the rising cost of renewable energy sources and the potential for Layer 2 solutions like the Lightning Network to reduce the volume of transactions required on the Bitcoin blockchain, the mining industry will significantly change in the not-too-distant future.

Due to its decentralized structure, Bitcoin can have infinite value because it provides a global network without one stand-alone authority. As Bitcoin is open-source, it encapsulates many applications, from payments to complex smart contracts that may, in the near future, herald the arrival of a new financial system.