Bitcoin Halving Explained by Qrypto Central

  • Bitcoin was created in 2009 by Satoshi Nakamoto
  • The first bitcoin halving took place in November 2012
  • The second bitcoin halving took place in July 2016
  • Bitcoin has a finite total supply of 21 million
  • 1,800 Bitcoins are mined per day on average
  • Bitcoin halving occurs at every 210,000 blocks which is reached every 4 years from 2009
  • The last bitcoin halving is expected to occur in the year 2140 as the 21-millionth bitcoin will be mined

 

What is Bitcoin halving?

To get the idea and meaning of Bitcoin halving, you need to first know how new bitcoins are created through a process called Bitcoin Mining. In simple terms new Bitcoins come into existence as a reward to Bitcoin Miners when a new Bitcoin Block is mined.
Bitcoin Halving is an event that marks the start of dividing by half the amount of Bitcoins that is emitted as a reward to miners for finding a new Bitcoin block. In clearer terms new Bitcoins are gotten as block rewards.

What is a Block Reward: A block reward is the amount of Cryptocurrency that miners receive when they successfully validate/mine a new block by solving highly complex mathematical problems with their mining hardware. It is a reward for their hard work.

 

Brief History

Before we take a look at the history of bitcoin halving, we need to understand two simple rules of the bitcoin protocol set by Satoshi Nakamoto.

Firstly, there will only be 21 Million Bitcoin ever in existence. This means bitcoin supply is finite. Right now there are 18 Million Bitcoin in circulation that’s about 85% of the total cap.
Secondly, the amount of bitcoin gotten at every 210,000 blocks is set to decrease by half its previous emitting rate. The 210,000 blocks are reached every 4 years from the time of creation of bitcoin which was in 2009.

When Bitcoin was launched in 2009, miners were receiving 50 BTC per block as block rewards. A total of 10,500,000 BTC was generated before the first bitcoin halving which took place in November 2012, when miners began to receive 25 BTC for each block mined.

The Second halving occurred on July 2016. When miners began to receive 12.5 BTC for every new block mined. This is half the previous block rewards of 25 BTC. 12.5 BTC is the current block rewards for Bitcoin mining.

When is the next Bitcoin Halving?

The next Halving which will be the third Bitcoin Halving in history is set to take place on May 2020. This third halving will once again reduce the block rewards by half to just 6.25 BTC.

Why Bitcoin Halving?

Looking at the economic aspects of things, where it is believed that, scarcity of a sort after commodity pushes demand up. Just like in gold mining where finding new deposits becomes challenging overtime. This pushes the demand and value of gold as an asset.

The idea behind Bitcoin halving in my opinion, is to reduce block rewards making it more difficult to find new blocks and as a result scale up demand for bitcoin. If gold was found on every street in the world like stones, then it won’t be a precious metal anymore and as a result would lose its value. From an Economical stand point, halving of bitcoin would be followed by higher prices for bitcoin but some people argue that this has not always been the case judging from past bitcoin halving events.

It’s important to note that every bitcoin halving cuts down the supply of BTC circulating, making the asset scarcer. If the demand is there, the price is likely due to increase due to less supply. On the day of the first Bitcoin Halving on 28 November 2012 bitcoin rose from $11 to $12 but it did not stop there but continued climbing as it reached $1000+ as at November 2013. That is exactly a year after the first halving.

As at July 9, 2016 which was the day of the second halving bitcoin rose from $576 to $650. Again, Bitcoin continued its post halving price growth through its next year of halving to reach $2500+ on July 9, 2017.

The big question is will Bitcoin follow its post year halving growth in price this time?
Looking at how popular bitcoin has become and how much interests it has gotten Worldwide, can we see similar patterns play out after the Bitcoin Halving of May 2020?

Conclusion

Bitcoin was modeled after gold, with an idea to make it more valuable overtime as difficulty increased to find new bitcoins. For these reason specific rules were set by Satoshi Nakamoto called bitcoin protocols. These protocols state that there will only be 21 million Bitcoin ever in existence and another protocol called halving was put in place to curtail inflation.

With these protocols in place bitcoin was a well thought after asset and modeled for excellence by Satoshi Nakamoto. I cannot bet if the next bitcoin halving will push its’ value up, but I know for sure with less supply comes huge demand and these market dynamics must surely come to play for bitcoin after the next halving.

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