Topic: Coinbase prepares to survive bitcoin halving & mass exodus (Read 1458 times)

This alarm bell went off in my head as well. Why now?

Bitcoin refusing to scale onchain bottom line is what's going to blow it up.  Also it's what is driving the value to Eth.

Armstrong is forward looking due to this.  The value of a chain is fungibility - offchain scaling ruins that.  A network that is refusing to increase capacity is worthless to investors.

I agree Eth is in a massive pump.  Partially because of what you said "If bitcoin doesn't increase in value before/at/soon after the halving - it will be considered a failure."

People are starting to wonder if that's going to happen and eth is exploding. 

The next block reward halving is coming up in July. Let’s say that miners on average are able to mine a coin for $250 (I don’t know the exact number, so this is a guess). After the halving in July their cost to mine a coin will double to $500. If the bitcoin price stays around $425, it will be unprofitable for a number of miners to continue mining.
The implication of this is that we could see a reduction of hashing power on the network at the July halving date. Perhaps in the range of 10–50% (I don’t have a good way to estimate this, if anyone does please post it).
In a worst case, let’s say that 50% of hashing power turns off at the block halving because it is no longer profitable for those miners. This would mean that we start getting blocks mined every 20 minutes on average instead of 10 minutes. But blocks are already 70% full today. If the average confirmation time goes to 20 minutes, it means that we will be at 140% of capacity on every block, and start accumulating a backlog.
Bitcoin has a mechanism to adjust the difficulty of proof-of-work when hashing power changes. This happens every 2,016 blocks, which is normally about two weeks. But if we’re mining a block only every 20 minutes, then this will take four weeks.
It gets worse. Even after four weeks of being over capacity waiting for the difficulty to adjust, there is still up to another two weeks of backlog to churn through before getting back to “normal” (70% capacity and occasional delays). So you are looking at about a six week period of ~2 week confirmation times or drastically higher transaction fees. In addition, with so many pending transactions the mempools of most nodes will fill up, meaning it is likely that most bitcoin transactions will not even relay, much less confirm. This could prevent merchants and wallets from getting a notification about a transaction for weeks.
If this causes the bitcoin price to fall, it will make mining less profitable, and a negative spiral could happen.
It’s unclear what the likelihood is of the above scenario (admitedly, I’ve described a worst case scenario). With the new supply of bitcoin halving, this could also drive the price up. And it’s difficult to estimate what % of hashing power could turn off at the halving. It could be much less than 50%. But I also feel that there is no reason to risk it and it’s incredibly irresponsible to play things so close to the edge. The network today, with 70% of blocks full, is already experiencing congestion issues and backlogs. Any reduction in hashing power will exacerbate the problem.
The fact that bitcoin core has allowed the network to reach this point is incredibly negligent, and I think says a lot about their motivations and competency as a team. There is no reason to roll the dice and see if this failure scenario comes to fruition.

This alarm bell went off in my head as well. Why now? I'm never mad at a company changing focus, but at such a critical /uncertain time, given blocksize/halving/eth competition concerns, why? Is someone aware of something we don't know? Because this transition is not free, capital and manhours will be spent to accommodate this rebranding/restructuring. and given how shrewdly this company has been ran, I don't expect a capital outlay without commiserate return.

Pretty simple to answer. Ethereum trading volumes are sky high, competitors such as Gemini are already trading it. You don't even have to consider anything about Bitcoin to see this makes sense for Coinbase to do, at least viewed short term.

This alarm bell went off in my head as well. Why now?