Bitcoin is one of the most popular cryptocurrencies in the world. It has the highest value against the US dollar as of today. But have you ever wondered why it has consistently grown from the value of $0.0008 in 2010 to $46,653 today? Of course, there are many factors, and one of them is regulating inflation through Bitcoin halving.
Bitcoin halving is a term that is more common to Bitcoin miners than investors. It is a crucial event that keeps Bitcoin in check and avoids a sudden increase in the market and loss of value. So, what exactly is Bitcoin halving and how does it work? Let’s find out.
What is Bitcoin Halving?
Before we talk about halving, let’s talk about Bitcoin mining for a moment. This is a process where people use supercomputers to verify transactions through a proof of work (PoW) process and get paid for this. They earn a fraction of Bitcoin, which means adding new coins to the market.
If you browse around this site, you will realize that Bitcoin halving is the process of reducing the reward earned by miners by dividing it in half after every four years or after mining 210,000 blocks. It sounds unfair to the miners but is good for the entire blockchain so that everyone can benefit. The good thing is that its value keeps growing, and by the time the halving event occurs, the value of the amount might be more than it was four years ago.
Bitcoin halving is predicted to occur until miners have nothing else to earn. There will be nothing more to mint because there is a limit of the Bitcoin to get into circulation. The speculated founder of Bitcoin, Satoshi Nakamoto, has set the Bitcoin limit to 21 million Bitcoin, which will be achieved by 2040.
The Next Bitcoin Halving
It is planned to happen in 2024. As the miners’ pay drops to 3.125 Bitcoin, the investors should know that there might be some instabilities in the blockchain and the entire process in general. This has been the trend since the first halving in 2022. However, this does not mean that the next halving will be the same following other factors such as the emergence of new crypto coins, the growth of Bitcoin, and the general economy of the world.
Benefits of Bitcoin Halving
The process lowers the available Bitcoin in supply, which is important for keeping everything in check. Slowing down the rate of minting new coins might increase the time before reaching the finite limit. Most importantly, it keeps the value of the coin growing steadily because of the high demand. Although cryptocurrency is volatile in general, halving plays a vital role in keeping Bitcoin stable.
Bitcoin halving might be unpopular to investors because it directly affects the miners. However, investors benefit more through its stability, and this means a better investment opportunity.
Bitcoin halving has been happening every four years since 2012 and the next one will happen in 2024. Its effects on the blockchain have been amazing and it is expected to do well until 2040 when there will be no more supply of the coin.