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Cryptocurrency: Bitcoin Halving Explained

Bitcoin

On May 11, 2020, we saw bitcoin halve the value of one bitcoin. There are computers (or nodes) to run the Bitcoin software and store the history of transactions on their network, the blockchain technology behind Bitcoin. All nodes need to approve it, which has the whole history of Bitcoin transactions. To verify the transaction is legitimate, the node performs several tests. You should also ensure that the transaction has the necessary validation criteria, such as nonces, and that it does not exceed the specified limit in size. For more accurate and to the point information, visit bictoin evolution.

Cryptocurrency Mining

Bitcoins mining is the practice of processing and validating transactions on the Bitcoin blockchain network using a computer. We can get more enormous block rewards by using faster machines and specialized hardware, such as computer chips designed for mining. We pay these machines in exchange for processing Bitcoin transactions. 

The term “mine” is not used literally but rather to describe the process of gathering valuable metals. Cryptocurrency miners verify the validity of transactions by solving complex mathematical puzzles. Miners receive bitcoins for processing and verifying transactions within a block, which occurs when we create a new “block.”

Bitcoin’s Price Dropping by a Half

Bitcoin halves the Block rewards for processing transactions after every 2.5 million blocks mined or about every four years. New bitcoins are now entering the market at a rate of the half. It’s a technique for Bitcoin to create a fictitious type of inflation by cutting its value in half every three years until all of the currency distributes. Up to the year 2140, this is how we will do things. When that happens, network users will be required to pay transaction fees to miners to reward them for their efforts. 

These charges keep miners motivated to continue mining and maintaining the network. Bitcoin’s finite supply is shrinking at an alarming rate, and the half represents yet another cut to that supply. As of August 2021, there will be around 18,799,131 million bitcoins in circulation, with just 2,200,869 million more to be distributed as mining incentives. 2 The payout for mining a block in the bitcoin chain was 50 bitcoins in 2009.

 It went from 25 bitcoins each block to 12.5, then 6.25 bitcoin per block on May 11, 2020, after the initial halving. Another way to look at it is to picture cutting the quantity of gold extracted from the Earth in half per four years. A “halving” the gold supply every four years will potentially raise the price of gold if the value of gold is dependent on scarcity.

Reducing the Impacts by Half

As the pace at which cryptocurrencies are halving, it will reduce the number of coins. Because of this, other assets with limited supply, like gold, may see a spike in demand and hence, higher prices. Historically, the halving of Bitcoin’s supply has coincided with sharp increases in the digital currency’s value. On November 28, 2012, a halving resulted in a $1,217 rise on November 28, 2013. On July 9, 2016, we saw Bitcoin’s value halve for the second time. 

The bitcoin price halved to $647 on December 17, 2017, while it had risen to $19,800 on December 17, 2017. A year later, the price dropped to $3,276 on November 17, 2018, which was a 506% increase over the pre-halving price. 3 On May 11, 2020, it halved the dividend again. The cost of a bitcoin increased to $64,507 on April 14, 2021. Exactly a month later, on May 11, the price of Bitcoin was $54,276, a gain of 517 percent, more in line with the 2016 halving. 

Musk, Tesla’s CEO, said on May 12, 2021, that the company would no longer take Bitcoin as payment, causing the price to fluctuate even further. As Musk remarks, the price of a bitcoin fell below $40,000 after Chinese officials imposed limitations prohibiting banking firms and payment firms from offering cryptocurrency-related services. Even though these two notifications may have momentarily lowered the price of Bitcoin, the price swings may be under the previous halving pattern.

Do you know what will happen if bitcoin’s Value is Halve?

When Bitcoin first started in 2009, each block held 50 BTC; however, this value was scheduled to be halved every four years, or by 50%. Three halvings have are today, resulting in a block containing only 6.25 BTC. A “block” would only have 3.125 BTC once the next halving happens.

About Author

I am Payal Badhran a pro-level blogger with 5 years of experience in writing for multiple industries. I have extensive knowledge of Food, Fitness, Healthcare, business, fashion, and many other popular niches. I have post graduated in arts and have a keen interest in traveling.

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