Bitcoin halving: When is it and what does it actually mean?

What is Bitcoin Halving?

Bitcoin is a digital currency Works independent of central control: Instead of an authority such as a bank or government keeping track of who owns what, Bitcoin relies on Cryptography.

So-called miners collect information about transactions and log them into a ledger called the blockchain. These miners use computers to perform a large number of calculations with the goal of completing a secret problem. 0.7 percent of global electricity during the process. The first miner to solve this problem adds their collection of transaction data – a block – to the blockchain.

They are also awarded a fixed amount of newly minted Bitcoin, a figure recorded in the source code that defines and operates the network. After every 210,000 blocks, an event called a halving occurs where the reward size shrinks by 50%. The purpose of this is to avoid inflation due to excessive coinage.

The first blocks ever mined had rewards of 50 coins, but now it has come down to 6.25 coins after three halvings. The last half was in May 2020.

When is the next bitcoin halving?

The next bitcoin halving is expected around April 19 and will reduce miners’ rewards to 3.125 coins. After 21 million coins are created, the rewards will continue to decrease before disappearing completely, sometime around the year 2140. At this point, no new coins will ever exist.

Why is this important?

For people using Bitcoin to buy goods or services, or holding the coins as an investment, nothing will change. The current pool of Bitcoin will remain intact. But miners will see a significant drop in the value of these rewards.

This could see some miners close up shop if they decide the effort is no longer worth the reward. But in truth, the economics of mining are always changing. Industry is likely to adopt And continue as before.

More powerful computers are constantly being built that can perform mining calculations faster, meaning blocks are mined more easily. But feedback mechanisms within Bitcoin’s code adjust by raising or lowering the difficulty of the calculation in response to the total power of the computer currently dedicated to mining. The Bitcoin source code aims to regulate the network so that a new block is created every 10 minutes, speeding up and slowing down as needed.

When Bitcoin was first launched in 2009, it was possible to mine a coin almost instantly using a basic computer. Now that requires rooms full of powerful equipment, often with high-end graphics cards or custom hardware adept at performing calculations. As a result, each reward is usually divided among many miners working as a team.

What could happen to the price of Bitcoin?

The recent emergence of exchange-traded funds (ETFs) — regulated financial products available from major banks, offering a simple way to invest in bitcoin — was long awaited and expected to drive prices higher. Now some analysis Estimation That about 704,400 coins are already in the hands of ETFs.

There are now two schools of thought on the impact of the halving: some believe it will give Bitcoin another boost and push prices higher, while others believe its impact is predetermined. . While regulatory approval for bitcoin ETFs was never certain, half of them have been, so the impact on price may already be visible. But it is almost certain that halving will not double the price.

The wild swings that bitcoin’s price has experienced over the years are diminishing, and the metrics that track fluctuations It seems to be going downhill.. But discussions about the value of Bitcoin are ultimately just speculation.