| Since the block reward is the only source of 'new' bitcoin, the rate of bitcoin creation will be halving as well. So there will be two competing effects: 1) 'monetary' inflation will decrease, because the rate of bitcoin creation will drop from 7200BTC/day to 3600BTC/day 2) miners will be earning half as much when denominated in BTC If the decrease in inflation doesn't cause a large enough corresponding increase in price, mining would be less profitable, causing some fraction of miners to drop out, and meaning longer transaction confirmation times (for at most 2 weeks, while the network adjusts to the change in capacity). My guess is that the huge change in inflation will adequately compensate both miners and investors, and cause a significant enough increase in price to avoid lengthening confirmation time. https://en.bitcoin.it/wiki/Controlled_Currency_Supply EDIT: by inflation, I mean 'monetary' inflation, rather than price inflation. |
To be clear, it wouldn't be two weeks. The network adjusts every 2016 blocks, which under normal circumstances would be approx. 2 weeks. Typically it's a little less as new hash power comes online, but in the case of a drastic loss of hash power, it could be much much longer than two weeks. We saw that with namecoin where it took almost half a year between adjustments (or would have, if developers hadn't intervened with merge mining).