Sometimes, it’s easy to forget that Bitcoin (BTC), created in 2009 by Satoshi Nakamoto, has only been in business for over a decade. As of February 29, 2024, with a market capitalization of $1.23 trillion and a cryptocurrency market capitalization of $2.29 trillion way before Bitcoin halving, BTC reached the remarkable level of $62,642 for the first time since December 20, 2021.
One of the most significant events on the Bitcoin network is the halving when the mining reward is cut in half. The network participants responsible for validating transactions get awarded 6.25 bitcoins (BTC) for every successfully mined block since 2020. This article will give you a deeper understanding of Bitcoin halving, its importance, and how it works, so keep reading the article to learn everything.
What Is Bitcoin Halving?
In order to understand Bitcoin halving, you must have knowledge about the Bitcoin network and have a basic understanding of the Bitcoin chart and prices.
Every 4 years, or after 210,000 blocks have been mined by the network, the reward that the miners receive after transactions is cut to half of the price they were getting before. The amount of fresh bitcoins generated is also reduced to half, which is why this event is known as the “halving.”
This rewards program will end when the intended cap of 21 million is achieved, which is assumed to be in the year 2140. When that point is reached, the network users will pay miners’ fees in exchange for processing the transactions. It will be done to guarantee that miners remain motivated and continue to maintain and contribute to the network just like before.
The halving event is important because it denies a further slowdown in the rate at which Bitcoin is created, and its supply gets closer to being exhausted. When having started in 2009, fifty bitcoins were awarded for mining each block in the chain. As of October 2023, only 1.5 million bitcoins remain that are yet to be released through mining awards. Approximately only 19.5 million bitcoins stay in circulation.
Until October 2023, Bitcoin has been halved three times The first time was Nov. 28, 2012, to 25 bitcoins, then July 9, 2016, to 12.5 bitcoins, and May 11, 2020, to 6.25 bitcoins. It is predicted that the next Bitcoin halving will occur on April 19, 2024. Miners who validate transactions correctly are currently rewarded with 6.25 new Bitcoin for every block that is mined. The block reward will be halved to 3.125 BTC the next time the event takes place
Significance Of The Bitcoin Halving?
One of the main components of Bitcoin’s monetary policy is the half-of-the-block reward, which is used to manage inflation, guarantee the cryptocurrency’s scarcity, and gradually raise its value.
Every time the halving event happens, it reduces the number of new bitcoins per block and results in a lower supply As the supply is reduced, the demand increases naturally This leads to a likely increase in the price due to supply and demand economics.
The eventual goal of the Bitcoin halving is to limit the total amount of coins in circulation to 21 million. The fixed supply of Bitcoin is what sets it apart from conventional fiat currencies, as they are susceptible to inflationary pressures due to central bank policies.
Historically, the price gain of Bitcoin following each halving event has been partially attributed to these scarcity-driven price dynamics. It will be interesting to observe how the price of Bitcoin is affected by halving events in the future.
Conclusion
Many analysts predict that the price will rise following the event as the number of new coins is limited, following the same trend as the previous three halvings.
Any increase in price, though, will be contingent upon how the market for bitcoins develops during the halving. The cryptocurrency industry has also significantly grown since the last halving in 2020, and we are seeing many more well-established cryptocurrencies that are competing for consumers. It indicates that the increase in demand isn’t certain and may even remain flat.
