We talk about an important technical update for Bitcoin and its consequences
The creator of Bitcoin under the pseudonym Satoshi Nakamoto linked the process of the emergence of new coins with the processing and confirmation of transactions with them. New bitcoins are created by miners, whose computers perform complex calculations that confirm transactions on a public ledger called the blockchain.
These transactions are packaged into blocks, and miners compete with each other to see who will finalize the new block of transactions, that is, add it to the blockchain. When a block of transactions is finally confirmed by a miner, that miner receives newly issued bitcoins in the form of a so – called block reward.
What is Bitcoin halving
rbc.group
Halving is a planned and coded reduction of the very reward that a miner receives when adding a block of transactions to the blockchain. Bitcoin halvings occur approximately once every four years, or more precisely, every 210 thousand. new blocks completed by miners. Each halving halves the number of bitcoins that miners receive as a block reward.
At the time of the launch of Bitcoin in 2009, miners received 50 Bitcoins per block, but during the first halving in 2012 this reward was reduced to 25 Bitcoins, in 2016 – to 12.5 BTC, in 2020 – to 6.25 BTC, and in 2024 it is planned to reduce to 3,125 coins.
What is the meaning of Bitcoin halving
The emission of Bitcoin is initially limited – there will be only 21 million coins in circulation, that is, over time, miners will extract the last Bitcoin. Some supporters of cryptocurrency see this as a prerequisite for the growth of its exchange rate: if the value of ordinary money with its constant printing is eaten up by inflation, then the limited supply of currency, on the contrary, gives it value. Halving prevents Bitcoin inflation by slowing down the rate at which new coins are created.
When will Bitcoin halving happen?
The 2024 halving is expected in April, but it is quite difficult to name the exact date and time of the halving. This is due to the fact that the period of time required to generate new blocks can either slow down or speed up depending on a number of factors.
According to numerous estimates, there will be 64 halvings before Bitcoin peaks at 21 million around 2140, after which the halvings will stop.. After this, miners will no longer receive block rewards and are expected to rely only on transaction processing fees.
How does halving affect the Bitcoin rate?
There is no direct connection, but there is historical data. For example, in 2012, Bitcoin rose in price by about 8,000% in the year after the halving, and after the 2016 halving, by almost 1,000%.. The last halving in May 2020 was followed by a bull market period, which ended with Bitcoin reaching an all-time high price of about $69 thousand. in November 2021. It is worth clarifying that the market is directly and indirectly influenced by many more factors. At the same time as the crypto market, other risky assets were growing.
According to some estimates, large miners will operate at a loss if the price of Bitcoin does not rise. This means that, taking into account the costs of electricity and other operations, the cost of one mined bitcoin for them will be higher than the price of one bitcoin on the market. For example, the financial company Cantor Fitzgerald sets this limit at $40 thousand.
Several analytical companies predict that the 2024 halving could lead to an increase in the Bitcoin rate by at least 80%.. Skeptics argue that it is incorrect to associate price increases with halving alone.. For example, the 2016 halving occurred at a time when the general public learned about Bitcoin, and the subsequent increase in its price coincided with the ICO (initial coin offering) boom, around which a significant speculative rush and demand for cryptocurrency formed. The growth in 2020 and 2021 coincided with a rally in the stock market and incentive payments to the population during the pandemic.
What to do with bitcoins after halving
Halving will not affect transactions with Bitcoins themselves.. For the average owner of cryptocurrencies, the way he uses them will not change in any way. The speed of transfers in bitcoins will not change, as well as the size of commissions. Halving only affects the size of the miners' reward, and, as a result, the supply of cryptocurrency.