Why the sudden halving every four years?

"Why the sudden halving every four years? I understand that the Bitcoin reward per block... must be a decreasing function, such that the sum of all rewards would be finite, [with a total of] 21 million coins, after 140 hundred years." "But why not choose a [more] simple decreasing function that would smoothly go to zero [subsidy]?" "Isn't it inconvenient that, every four years, the profitability of miners suddenly decreases?" "[Would] fees [need to] suddenly increase in order to compensate them?" That is a question which has been asked many times: why did Satoshi [write the code] that way? Why is it not a smoothly decreasing function, instead of a step function? Currently, the production / issuance of bitcoin on the blockchain every ten minutes is 12.5 bitcoin. It will be 12.5 for four years and will then be divided in half to 6.25 bitcoin in 2020. Well, that is the way Satoshi built it. Once [the code was written], once it was in progress, there is very little incentive for miners or anyone to change that fundamental function. By postponing the pain in a step function, in the four years leading up to the decrease, [miners are receiving] the full amount rather than a slow, gradual decrease. This gives an early advantage to those who are mining now versus in the future. Another way to look at it... Despite the fact that it is a step function, because it is broadly known... well in advance that the [subsidy] will drop by exactly half every four years, we know exactly how the step function will [play out] all the way to year 2140. Miners effectively build their operational models to account for it, and no one is surprised by this. The market already prices in that consideration years [ahead], from an operational perspective. Miners are already adjusting [their expectations] for profitability up to one year before the Halvening. Their investments in infrastructure, operational costs, and electricity costs are all taken into consideration. The market ends up pricing it in. When [the Halvening] happens, not much changes. The network was ready for it. That is the fundamental [policy[ difference between the Halvening in Bitcoin... and a sudden change in the interest rate of fiat currency, which is unexpected and the market must adjust to [in a shorter period of time], in a scenario where the market doesn't know. There are only probabilities, which are appropriately accounted for in the [exchange rate] of currencies, In Bitcoin, it is not a probability. It is a certainty that is known well in advance, and people can plan for it.

Why was it not designed a different way?

Why [was it not designed a different] way? Because that is not how Satoshi did it. Once it was done, it is done. Could it have been better with a [gradual] decrease? Well, there are blockchains... where that is the case and it is a mixed bag. I don't know if this is a particularly big disadvantage of Bitcoin. So far, we have seen two Halvenings happen, and they have been largely uneventful. If anything, they have caused an increase in the value of bitcoin right after the Halvening.

What will be the trend in the Bitcoin ecosystem as the block reward becomes smaller?

It doesn't seem to be a problem. Vladimir asks, "What will be the trend in the Bitcoin ecosystem as the block reward becomes smaller?" "Will there be fewer miners? Will security be compromised as a result?" "Will transaction fees skyrocket to support miners?" Honestly, none of the above. As the block [subsidy] becomes smaller and smaller, as Satoshi predicted in many of his writings, fees will need to replace the [block subsidy]. However, those fees may come from more transactions or bigger transactions... that aggregate [payments] on a second layer. The value of bitcoin may be [on a] very different [scale] than it is today. Miners could be compensated through [fees]. Even if we had less [hash power] than what we have now, less [cumulative] proof-of-work than what we have right now, that doesn't make the system insecure. We have been growing at such a ridiculously exponential rate, in terms of the total mining power. Bitcoin was secure two years ago, when 90% of the mining we have today didn't exist. We have seen an order of magnitude increase every two years. At that rate, making the network ten times... more secure doesn't mean that it wasn't secure before. If we did have a reduction in miners, there are levels of security with proof-of-work in the past that are... perfectly capable of maintaining the security of the network [today]. I don't think we have any major problems. Historically, every time there has been... a Halvening, that has affected [bitcoin] by increasing the price in the long term. It has mostly being a non-event. The Halvening is something you can predict with certainty... and some accuracy years in advance, [with even more accuracy] as we [approach] the event. Of course, it will happen on the exact block that you expect it to. The entire market prices that in with increasing levels of accuracy as you get closer to the event. So do the miners in their operating models and profit models. It becomes a non-event in the end. I think it will continue to do that.