Have you been informed about Bitcoin halving?
This is an event that takes place once every 4 years and we will explain to you its purpose and how it impacts Bitcoin. This article will provide you with all the information you need to know to understand halving and how to take advantage of it.
Contents
Exploring Bitcoin Halving – What is it?
The process of halving involves a cut in the reward given to miners for each block in half.
So, if a miner was previously receiving 6 BTC per block, after halving, they will receive 3 BTC instead.
It has been determined that a halving takes place every 210,000 blocks, which occurs approximately every four years.
Production of Bitcoins will end when the total amount of issued digital coins reaches 21 million. Currently, more than 19 million Bitcoins have already been mined, accounting for 91% of the total. During the halving, the amount of coin production is decreased by half.
When Satoshi Nakamoto created Bitcoin, they were presented with the difficulty of how to disseminate and produce coins. As a result of the idea behind Bitcoin, centralized alternatives were not considered an option. The solution to this dilemma was the mining process.
Payments using Visa or Mastercard are sent through their respective company's servers; however, this is not a feasible option for Bitcoin.
As a substitute, miners are employed to take on the role of carrying out and confirming transactions. They use their machines to compile transactions into blocks, which they then add to the blockchain, guaranteeing the decentralization, security, and trustworthiness of the Bitcoin network.
As a reward for their efforts, miners are given compensation for each block they add to the blockchain. This is how new coins are generated, which the miners may then put into circulation and use.
What is the purpose of halving?
To stop inflation, the concept of halving was devised by Satoshi Nakamoto in his White Paper about blockchain technology and cryptocurrency.
This idea is implemented in the Bitcoin source code, and the halving process is the center of this system. It helps to manage the rate of inflation as well as the production of new coins.
The emergence of halving can be attributed to the promotion of Bitcoin's progress. Central powers do not control its worth; only the demand of investors can affect the worth of the digital currency. Its value will be based on how useful it is in the moment.
The basis of the fresh crypto economic system was decentralization. To safeguard it, halving is essential. It is essential that the cryptocurrency is not held in the hands of initial purchasers and is shared throughout the digital sphere.
Experts believe that Bitcoin should be a rare asset. Its increased distinctiveness will lead to an increase in demand, which in turn will cause the price to rise (supply goes down, demand rises).
What is the timeline for the upcoming halving?
It is important to note that halving events take place every 4 years.
On the 28th of November, 2012, the first halving of Bitcoin occurred, reducing the number of coins received per transaction from 50 to 25. The cost of a single BTC at this time was $12.31.
The second halving event was recorded on the 9th of July, 2016, with the value of 1 Bitcoin increasing to $650.63.
The third halving happened on the 11th of May, 2020, with the cost of a single Bitcoin escalating to $8,700. Crypto experts are predicting 32 more halvings.
The following halving is predicted to take place in 2024, and the last one is scheduled for the year 2140.
What are the ways to make money from the Bitcoin halving event?
Analyzing Bitcoin's growth trend, it's easy to observe that after halving events, the asset's price climbs to a top point before then falling to a lower level, and the cycle continues.
The data demonstrate that every halving witnessed an upsurge in the worth of BTC. With only a year to go until the next one, many crypto-entrepreneurs are already in the process of preparing for it.
Although past occurrences might be able to assist us in predicting possible scenarios, it is not wise to entirely depend on them.
Since the previous halving, there have been several events that have influenced Bitcoin: increased media coverage, the ICO hype, the crypto apocalypse, the collapse of various crypto businesses, and the entrance of institutional investors.
It is important to be mindful of your investments during the halving period. Crypto traders who take risks can potentially benefit due to the high volatility of the crypto market.
To be successful, one needs to carefully analyze the situation, have faith in themselves, have a reserve of funds in case of a loss, and remain up-to-date on the rules of the market.
Summary
The conclusion of this paper can be summed up as follows.
Halving is a crucial part of Bitcoin's design. With it, the supply of the maximum of 21 million Bitcoins put forth by Satoshi Nakamoto will not be exhausted too quickly, giving the crypto world more time to develop and allowing for an increase in both the interest and transactions of Bitcoin.
As a result, it is apparent that Bitcoin was engineered to be of value, and with each halving, that value will be reduced.
The inflation of Bitcoin is managed by decreasing its production via halvings.