Bitcoin halving is an event that happens every few years in the Bitcoin network. It’s like a built-in rule that reduces the number of new Bitcoins that are created and given to people who validate transactions on the network.Read More
What is Bitcoin halving?
To understand halving, we need to know a bit about how Bitcoin works. Bitcoin is a digital or virtual currency that was created in 2009 that operates on a decentralized network called the blockchain. This network keeps a record of all Bitcoin transactions and ensures their security. Miners are the people who help maintain this network and make it secure.
Miners play an important role in the Bitcoin. They use powerful computers to solve complex mathematical problems to verify Bitcoin transactions. When they successfully solve a problem, they add a block of transactions to the blockchain and are rewarded with new Bitcoins.
When Bitcoin was created in 2009, the block reward was 50 Bitcoins for every block of transactions that miners added to the blockchain. But here’s the interesting part: the creators of Bitcoin wanted to control the supply of new Bitcoins, so they included a special rule in the system. This rule states that the block reward is halved approximately every four years.
So, during a halving event, the block reward is cut in half. For example, the first halving in 2012 reduced the reward to 25 Bitcoins per block. Then, in 2016, it was halved again to 12.5 Bitcoins per block. The last halving happened in 2020, brought the reward down to 6.25 Bitcoins per block.
Why is Bitcoin halving important?
The purpose of halving is to manage the supply of new Bitcoins and create scarcity. There are only 21 million Bitcoins. By reducing the rate at which new Bitcoins are created, halving slows down the flow of new coins into circulation. This limited supply makes each Bitcoin more valuable. It’s similar to how rare diamonds or gold are more valuable than things that are abundant.
Another important aspect of halving is that it adds predictability to the issuance of new Bitcoins. Miners, who invest in expensive mining equipment and use lots of electricity, need to plan their operations. With the halving schedule known in advance, they can adjust their strategies and calculate potential rewards. This predictability helps keep the Bitcoin network stable and functioning smoothly.
Will halving increase the price of Bitcoin?
Halving events often generate a lot of excitement and interest in the Bitcoin community. Some people believe that halving can lead to an increase in the price of Bitcoin. The logic is simple: if the supply of new coins decreases, but the demand for Bitcoin continues to grow, then the price might go up due to the scarcity.
However, it’s important to note that halving alone does not guarantee price increases. Bitcoin’s value is influenced by various factors, such as market demand, investor sentiment, and technological developments.
How many Bitcoin halvings have taken place till now?
The first-ever Bitcoin halving took place on Nov. 28, 2012 — cutting rewards to just 25 BTC from the initial reward of 50 Bitcoins. On this date, the price of one bitcoin was about $12. And after a year the price of Bitcoin stood at $1,031.95 on that date in 2013. That’s an annual rise of 8,500%.
Let’s come to the second halving in 2016, this time rewards tumbled down to 12.5 BTC, At that time (July 9,2016) the cost of one Bitcoin was $ 650.96. The next year the price of Bitcoin at $2518.44. And on Dec. 17, 2017, Bitcoin jumped to its all-time high of $20,089. It took just took around one and a half year for it to grow to 2,990%.
Now let’s look at the third halving in May 2020, on 11th May the bitcoin price was $19,119.90. Years later in May 2021 the cost of Bitcoin was $56612.10 which was a 559% increment in its price in just one year.
Fourth Bitcoin halving will be in 2024.
After almost one years of every halving process Bitcoin is reaching its all time high. It is not necessary that it will follow the same pattern in future but data says that this is happening.
