Bitcoin is the first cryptocurrency and blockchain. Bitcoin was created in 2009 by Satoshi Nakomoto a pseudonym for an individual or a group that created Bitcoin. Satoshi Nakomoto incorporated a set of protocols while creating bitcoin. One of this protocol is Bitcoin Halving event.
Into the Bitcoin Protocols
There are two Bitcoin protocols, let’s take a look.
1. Fixed Total Supply of 21 Million
This means Bitcoin has a fixed total supply of 21 Million digital coins. In simple terms there will only be 21 Million Bitcoin to ever exist and new bitcoin will be gotten from a process called bitcoin mining until it reaches the 21 Million coins.
2. Bitcoin Halving
New bitcoin are gotten through a process called bitcoin mining. The present emission rate for each block found through bitcoin mining is 12.5 BTC. This means those mining bitcoin are rewarded with 12.5 BTC for each new bitcoin block found. But then at every 200,000 Block found or every four years from the time of creation of Bitcoin in 2009 the emission rate for new bitcoin is always divided by two or halved. This process of halving Bitcoin emission rate is called Bitcoin Halving.
Bitcoin Halving is the second Bitcoin protocol coded into the Bitcoin Blockchain Smart Contract by Satoshi Nakamoto.
What should We Expect from Bitcoin Halving?
1. Halving of Block Rewards
Block rewards as mentioned above would be divided into two. Miners were receiving 12.5 BTC per block found, now they will receive 6.25 BTC per new block. This means the difficulty in finding new blocks will be increased.
2. Quantitative Halving a Contrast to Quantitative Easing
Bitcoin Halving shows Bitcoin is a better store of value with Central Banks across the world printing more FIAT to battle the present economic downturn. Inflation rates are climbing and currencies are losing value.
Instead of increasing emission rate like the central banks printing more money, bitcoin is about to halve its emission rate. It’s also important to note that Bitcoin has a fixed total supply of 21 Million and more bitcoin cannot be printed to increase the total supply beyond 21 Million. Bitcoin will be having a quantitative halving if we would called it that on 12th May 2020. Where would you rather store value?
3. Increase in Hash Rate
According to a recent poll conducted by Blockfolio, 37% of the cryptocurrency community believes Bitcoin hash rate will increase a month after Bitcoin Halving event. Also Philip Salter the head of mining at mining firm Genesis Mining, in an interview with cointelegraph.com said:
There is a new generation of mining on their way, which would come online shortly after the Halving event. That by default will increase the hash rate.
N/B: Hash Rate is a metric used in measuring a miner’s performance. In simple terms it is the speed at which a miner or mining hardware solves the bitcoin code to find new blocks.
4. Less Supply and Higher Demand
Looking at how bitcoin has performed after the past two halving events I believe with halving what will follow is a higher demand for Bitcoin. OPEC has been using this technique overtime to push prices of crude oil by cutting production which reduces supply and increases demand in the process. Let’s hope history will repeat itself concerning #BitcoinHalving2020 and demand will be scaled up which would correlate in upward price movement.
Many cryptocurrency enthusiasts including myself believe #BitcoinHalving2020 will be followed with higher demand for Bitcoin amidst the present economic downturn due to #COVID19. Many people will be looking for an asset to store value and hedge against inflation. Bitcoin is that asset, bearing in mind how central banks are printing more money resulting in souring inflation rates and currencies losing value.