Bitcoin has been trending on various online platforms for varied reasons. In addition to the surging prices of this cryptocurrency, Bitcoin has the largest market capitalization. It’s also the most dominant and popular cryptocurrency.
And one of the events that make Bitcoin hit news headlines is an event called Bitcoin halving. Maybe you’ve heard about this event, but you don’t know much about it.
- Cryptocurrency: Regulation not prohibition is the way forward – Otti
- SEC: Cryptocurrency market worth $2trn, it can’t be ignored
Bitcoin Halving Explained
Bitcoin halving is an anticipated event in the world of cryptocurrencies. It’s crucial to study the primary method of getting Bitcoin to comprehend Bitcoin halving. And that is Bitcoin mining.
Bitcoin mining involves solving mathematical problems or verifying Bitcoin transactions, and getting Bitcoins as the reward.
Bitcoin miners solve highly complex equations in the Bitcoin network to complete blocks. The Bitcoin network adds all verified transactions or blocks into the blockchain. A block is ideally a file that keeps or stores 1 megabyte of Bitcoin transactions in Bitcoin halving. The Bitcoin network increases as miners verify more transactions.
A miner gets the reward after verifying a transaction within 10 minutes. In Bitcoin halving, the system divides the miners’ crypto reward by half after mining 210,000 blocks. And this happens around every four years.
How Bitcoin Halving Works
As hinted, Bitcoin halving happens after mining 210,000 blocks. Initially, Bitcoin miners received 50 bitcoins for each verified block.
But after 2012, this reward was divided into two. That means miners would get 25 bitcoins per block. In 2016, miners produced the second set with 210,000 blocks.
Subsequently, the system divided the reward again into two. Thus, the miners got 12.5 bitcoins.
Recently in 2020, miners produced another set comprising 210 blocks.
Again, the system divided the reward into two. So, the miners received 6.25 bitcoins per block. And this trend will continue after the next four years.
Why Is Bitcoin Halving Necessary?
Perhaps, you’re wondering why this event occurs? Is this fair for Bitcoin miners that spend time and resources to mine the cryptocurrency?
The reason you’re asking these questions is that you know you can easily buy Bitcoin. Platforms like Crypto Group Software allow you to purchase and sell Bitcoin quickly. You can visit bitcoin profitapp to find out how you can do that. The question in your mind now is, why would somebody spend hours solving complex mathematical problems when they can buy Bitcoin online?
Well, Satoshi Nakamoto produced Bitcoin with a limited 21 million coins supply.
Currently, miners have made around 88.83% of the total Bitcoin supply. That means only 2.3 million Bitcoins remain.
But, there is no guarantee that what miners have already produced is circulating in the current market. Some experts have even reported that people have lost Bitcoins worth billions of dollars.
After mining all the 21 million Bitcoins, miners won’t receive the block rewards. They will only earn money from confirming transactions.
When halving occurs, miners’ rewards are divided by two. That means Bitcoin becomes scarce due to the limited supply.
As such, the value of this cryptocurrency will continue to increase. And the surging Bitcoin’s price motivates minors to keep digging.
Bitcoin halving affects traders, miners, investors, and the price of this cryptocurrency. That’s because it increases the number of Bitcoins in circulation.
However, lost Bitcoins and the limited supply of this cryptocurrency make its price continue growing. What’s more, the increasing worldwide adoption and rising popularity of this digital currency increase its demand and cost. Thus, even if Bitcoin halving increases the number of coins in circulation, Bitcoin is still scarce. And this scarcity will continue as miners near the 21 million coins limit.