What Is Bitcoin Halving and When Does the next Bitcoin Halving Occur

When Satoshi Nakamoto created Bitcoin in 2009, his plan was to ensure that the creation and distribution of Bitcoin did not depend solely on the shoulders of a select few. The concept of Bitcoin mining was introduced to put this into action. Before we can even attempt to understand Bitcoin halving, it is important for us to analyze Bitcoin mining and what it entails.

What is bitcoin mining?

Bitcoin mining involves a reward for those who, through computational work, verify and authenticate new transactions in blocks. In essence, bitcoin mining is the process behind the creation of new currencies and involves adding a transaction to the public ledger of bitcoin. This ledger, because it includes blockchains, is referred to as Blockchain.

Thus, Blockchain mining, in essence, is a record-keeping activity and is performed by miners. These miners ensure that the blockchain is uniform, up-to-date and immutable. In return, these miners are offered a certain amount of newly created coins.

What is bitcoin halving?

Now that the reward offered to Bitcoin miners is well understood, we can move on to what Bitcoin block halving is. Satoshi Nakamoto in his really sophisticated code has programmed Bitcoin in such a way that after two hundred and ten thousand (210,000) completed blocks, the amount of new Bitcoins created is halved.

Check the history of Bitcoin halving and you will observe a particular pattern. In 2009, when Bitcoin was newly launched, the reward for miners was limited to 50 Bitcoins per block. In November 2012, after nearly four years, the reward was reduced by half to 25 Bitcoins per block. This period was officially known as the second era of the reward.

The bitcoin halving program is such that every four years the event occurs. Although bitcoin halving occurs after the completion of 210,000 blocks, an arbitrary date can be estimated.

The third reward era of Bitcoin mining occurred in July 2016, and the reward for miners was reduced to 12.5 Bitcoins per block. This will continue for years until the year 2140 when all 21 mln Bitcoins in the store have been depleted.

Why do we have Bitcoin halving events?

This is a very important question to ask, especially for miners. This is enacted to ensure that Bitcoin is in accordance with the laws of supply and demand. A perfect illustration is a money supply regulating the distribution of legal currencies in central banks.

A new Bitcoin is created based on certain features of the currency that are pre-programmed into the system. With a fiat currency, there are several factors involved. One of the main discrepancies is the consideration given to debt, inflation and other factors.

This is why there is a need for a means to limit the supply of Bitcoin at any given time.
Implication of Bitcoin mining event.

Reduction in rewards

Considering the fact that many of these miners rely solely on the reward they get, a further halving of Bitcoin could have less than desirable effects. One of the main reasons for this is the rigidity of Bitcoin and the maximum number of coins allowed in circulation. Adding these new blocks at a reduced price without a concomitant increase in transaction fees or the value of the Bitcoin they earn could cause failure.

Strong competition for mining

A Bitcoin mining event means that the amount of Bitcoin mined is steadily increasing, and unfortunately, this means that we have fewer Bitcoins to mine. Before long, competition will become fierce and transactions will take longer. In the event that miners do not shut down due to lack of activity, we can expect scarcity to engineer an increase in the price of Bitcoins.

Decline in the popularity of mining

Some companies are already bearing the brunt of Bitcoin’s halving. In 2016, KNC Miner, a Bitcoin mining company in Sweden, filed for bankruptcy and the main reason was the impending Bitcoin halving event.

Another report stated that about 25 percent of mining platforms will be affected by the net halving event. As it becomes more and more expensive to mine, large-scale mining installations will shrink and this will make profitability almost impossible, deterring new investors.

When is the next bitcoin halving event?

Currently, miners are rewarded with about 12.5 Bitcoins for completing a block and 2,500 transactions constitute a block. In May 2020, the next Bitcoin halving event will occur and this will cause the reward to be further reduced to 6.25 Bitcoins per block.

Expectations from the Bitcoin mining event

The countdown to Bitcoin halving comes with some expectations. Some of them are listed below.

A rat drop may be imminent

The hash rate is the rate at which a computer completes a transaction in the blockchain network. Before Bitcoin’s latest halving, the hash rate was estimated at 1.54 exahash per second and was expected to decline further. This is because some older equipment that is no longer considered profitable will leave the network and this, in turn, will result in a decline in the network hash rate.

Bitcoin’s price will fall and then rise

While it is normal that those investors who have been pumping loads of funds into Bitcoin will look to cash out, the apprehension surrounding Bitcoin will subside and cause renewed interest in the currency. The law of supply and demand will come into effect, correcting the previous mistake, and the new buying will not have a negative impact on the currency.
Four-year rule

It will not take long to find justifications for the price increase and adoption, and this is not unexpected. It has happened twice and the third time will be no exception. Questions such as “What is Bitcoin halving?”, “Is Bitcoin halving necessary?” are now well addressed. In addition, Bitcoin’s halving schedule can be estimated based on the four-year rule.



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