You may have heard about Bitcoin halving before — it happens every 4 years, but what is it exactly and how does it affect Bitcoin? In this article we’ll tell you everything you need to know about halving and how to use it to your benefit.
What is Bitcoin Halving?
Halving is a process of reducing the reward for miners per block in half: if miners received 6 BTC per block, then after halving they will get 3 BTC. Experts have calculated that a halving occurs every 210,000 blocks, which happens about once every four years. It will stop when the number of issued digital coins reaches 21 million. At the moment, more than 19 million Bitcoins have already been mined, which is about 91% of the total amount). During the halving, the quantity of coin production is halved.
During the creation of Bitcoin, Satoshi Nakamoto was faced with the problem of issuing and distributing coins: how and in what volumes new Bitcoins would be mined. Centralized options were unacceptable due to the very philosophy behind Bitcoin. The solution was a mechanism called mining.
In traditional systems like Visa or Mastercard, payments are made via the company’s servers. For Bitcoin, this is unacceptable, but transactions must somehow be carried out and confirmed. This is what the miners do. They use their equipment to collect transactions into blocks and then add these blocks to the blockchain, ensuring the reliability, decentralization and security of the Bitcoin network. For adding each block to the blockchain, they get a reward. Thus, the system works and new coins are issued, which the miners then spend, launch in the community, and so on.
Why do we need halving?
The main reason why the Crypto World needed the phenomenon of halving is to prevent inflation. The idea of halving was described back in 2008 by Satoshi Nakamoto in his White Paper, the first document outlining the principle of blockchain technology and the concept of cryptocurrency. The Bitcoin halving is the heart of this concept — it helps to control the inflation rate and the distribution of new coins. The halving mechanism is embedded in the Bitcoin source code.
Another reason for the appearance of halving is the stimulation of the Bitcoin growth. Its value is not controlled by the central authorities. Only the direct demand of investors can influence the value of a cryptocurrency. It will be determined by the degree of utility of the crypto asset at a given moment in life.
The new crypto economic system was based on the idea of decentralization. Halving is just necessary to maintain it. It is important that the cryptocurrency is not concentrated in the hands of early buyers and is evenly distributed throughout the digital space. According to experts, Bitcoin should be a rare asset. Greater uniqueness will generate an increase in demand, and this, in turn, will provoke an increase in price (supply decreases, demand increases).
When can we expect the next halving?
As already mentioned, halving occurs every 4 years.
- The first halving occurred on November 28, 2012. Then the number of received Bitcoins per transaction fell from 50 to 25 units. The cost of 1 bitcoin in 2012 was $12.31.
- The second halving was already recorded on July 9, 2016. Then the cost of 1 BTC increased to $650.63.
- The third halving took place on May 11, 2020, when the cost reached $8,700. Crypto analysts are planning another 32 halvings.
- The next one is expected in May of 2024 and the last one is scheduled for 2140.
How to make money on Bitcoin halving?
If you look at the growth dynamics of Bitcoin, it becomes clear that after a certain time after the halving, the price of the asset reaches a price peak, after which a downtrend begins. Bitcoin reaches lower price levels and history repeats itself again.
As statistics show, halving was always accompanied by an increase in the value of the BTC. A little more than a year is left until the next one, and many crypto-entrepreneurs have already begun preparing for it. Although previous events can help to understand possible scenarios, we cannot completely rely on history. Since the last halving, we have witnessed many events. Increased media exposure, ICO mania, crypto winter, the opening of doors for institutional investors — all of these have had an impact on Bitcoin.
So, first of all, you should pay attention to your investments during the halving period. Due to the high volatility of the crypto market, crypto traders who are not afraid to take risks often make fortunes in these periods. What is important here is a competent analysis of the environment, self-confidence, financial cushions in case of failure, and constant study of the principles of the market.
Bitcoin halving is a natural process. Without it, the final maximum of 21 million tokens set by Satoshi would have been mined long ago. Thanks to halving, the crypto industry still has time to develop. Interest in Bitcoin continues to grow, and the number of transactions carried out with it is increasing. The bottom line here is that Bitcoin was designed to be valuable. And with each halving, this value will increase. The inflation of the Bitcoin monetary system is controlled by slowing down its production through halvings.
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Is Bitcoin Price Going To Increase?” and “Telegram Will Launch a Crypto Wallet and Exchange”.
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Originallu published on our Publish0x blog.