What Does Bitcoin Halving Mean?
But many questions are also bothering cryptocurrency enthusiasts like you such as what does Bitcoin halving mean? How can it affect the price of Bitcoin? Does it affect miners too?
Well, in this guide, you’ll get to know the answers to your questions about Bitcoin halving. Keep on reading.
What Does Bitcoin Halving Mean?
Bitcoin (BTC), which is the pioneer of cryptocurrency, undergoes a process known as ‘halving’ after every 210,000 blocks are created. This halving process occurs every 4 years. Satoshi Nakamoto, who is the mysterious inventor of this cryptocurrency, integrated this mechanism into the protocol. Once the halving process is completed, the supply of new Bitcoin is cut into half that, in turn, halves the block production rewards for miners.
When halving occurs, miners receive 50% fewer Bitcoin for verifying their transactions.
History of Bitcoin Halving
When we talk about its history, the first halving took place in 2012 when the original reward amount of Bitcoin was 50BTC. However, after halving the event, it was cut into half becoming 25 BTC. The second Bitcoin halving occurred in 2016, wherein this amount halved into 12.5 BTC per block. Since then, it has stayed the same. Since the halving event occurs after approximately every 4 years, current 12.5 BTC will further reduce to 6.25 Bitcoin per block expectedly in May 2020.
Halving is done to increase the operational efficiency of BTC. Also, network fees reduce significantly, which ultimately increases the demand for Bitcoin. As a result, the adoption of Bitcoin is increased widely on a global scale.
Is Bitcoin Halving Necessary?
You might be thinking, what’s the point? Well, unlike fiat currencies that are printed by central banks at their well, the Bitcoin supply is deliberately limited algorithmically. We all know that there will be only 21 million BTC in existence. Its finite number makes Bitcoin a deflationary asset as opposed to inflationary fiat currencies.
Furthermore, this halving event slows down the pace of Bitcoin creation so that its supply does not surpass its demand. To some people, it serves as the signal to hurriedly buy BTC as its slow growth may result in its increased prices.
What Happens after Bitcoin Halving is done?
Many cryptocurrency buyers ask whether Bitcoin prices will increase or not after the halving event. It is said that halving of block reward tends to have a positive impact on the Bitcoin price. However, one should note that a change in price depends on the ratio of supply and demand ratio. The supply of Bitcoin is cut down due to halving that makes it scarce. If Bitcoin is still in demand, it is expected to rise. Actually, the price of Bitcoin depends on many factors, not just halving and demand.
So far, Bitcoin has seen two halving events. In both events, Bitcoin prices began to rise. In 2012 Bitcoin halving, Bitcoin price briefly rose from $11 to $12 before projecting to $1,038 within a year. This is an almost 9,336.36% increase in Bitcoin price.
After the 210,000 Bitcoin blocks, in the second 2016 halving event, the price of Bitcoin increased from $576 to $650 as Bitcoin buyers accumulated BTC before halving. This price surged to $2,526 in 2017. It accounts for almost a 288.60% increase in BTC valuation.
In 2020 halving, it is anticipated that Bitcoin halving has been priced already. In case history repeats itself despite the changes occurring in the industry, Bitcoin prices expected to go up in its 3rd halving event.
Bitcoin halving also impacts the mining stability of the system. The role of miners in Bitcoin’s ecosystem is vital. Besides mining of new blocks and assisting BTC transactions, it is the responsibility of miners to maintain the overall network. Here comes the ‘Hashrate’ that refers to the computational ability of the Bitcoin network. The security and speed of the network highly depend on the hash rate. In case the miner leaves the network, transactions cannot be processed due to blocking of the network.
Furthermore, Bitcoin halving also affects miners as mining requires a sufficient amount of energy to perform calculations and cool systems performing these calculations. Also, the mining cost can range from $3,500 to $6,500, in addition; it might depend on the costs of electricity and equipment. Due to fierce competition among miners, many small participants have run out of business.
2024 Bitcoin Halving
It is anticipated that all 21 million BTC will be mined by the year 2140, or more probably 98% of them will be mined in 2030. The 2024 halving event is more likely to take place between March and June 2024.
Now you know the link between Bitcoin halving and price volatility. Also, an increase in demand for Bitcoin due to its scarcity will increase its price that can benefit you. So, what are you waiting for? Visit our website and take a chance and start investing in Bitcoin to leverage from the halving event.