What is Bitcoin halving?
Today I want to take you through the concept of Bitcoin halving.
Gold is scarce on Earth, and there is only one Mona Lisa painting. Do you understand why we included this citation in the same clause? Value is produced by scarcity. The creator of Bitcoin, Satoshi Nakamoto, most likely shared this viewpoint. By halving the mining rewards, he kept Bitcoin from having an infinite supply by encoding it in the network's logic.
I have already written about how there are only 21 million bitcoins in existence. Its restricted supply is due to the idea of Bitcoin halving. Are you curious how the "Bitcoin halving" creates a finite supply?
• Bitcoin block rewards and mining
• What is halving Bitcoin, and when does it occur?
• What effect does the "Bitcoin halving" have on the price of Bitcoin?
Bitcoin block rewards and mining
To extract minerals and other resources, people mine or dig. In a similar manner, miners obtain Bitcoins through Bitcoin mining. The miners are actually computer nodes, and the axes are the computational power in this instance.
Verifying transactions and adding them to the public blockchain ledger are the two steps in the bitcoin mining process. The transactions in Bitcoin are confirmed by the network's nodes or users because the currency is decentralized.
Participants in the Bitcoin network who have the required hardware and computing power validate transactions. They are referred to as miners.
Since the Bitcoin network is decentralized, anyone with access to the internet and mining equipment is able to take part in the mining process. In order to solve difficult computational problems, mining needs sophisticated computers.
Proof of work is a challenging mathematical puzzle that miners must solve. The purpose of this procedure is to assess the reliability of Bitcoin transactions. The block reward is given to the miner who completes the problem first.
The fresh Bitcoins that are released with each block that is added to the blockchain are known as block rewards.
What exactly is Bitcoin halving, and when does it take place?
Bitcoin halving refers to the idea of halving the block rewards distributed to miners. The network is set to automatically halve Bitcoin rewards after every 210,000 blocks, reducing them by 50%.
One block takes 10 minutes on average, and the halving event occurs after 210,000 blocks. As a result, Bitcoin is halved every four years.
When Satoshi Nakamoto launched the Bitcoin network in 2009, the block reward was 50 BTC. On November 18, 2012, the first Bitcoin halving occurred, and the reward was cut in half, to 25 BTC per block.
The halving event has occurred since its inception and will continue to occur every four years until the reward is reduced to zero.
The halving of bitcoin is expected to continue until the year 2140. When the 34th Bitcoin halving occurs, the final reward will be reduced from 0.00000001 BTC to 0. It is impossible to create more than 21 million Bitcoins due to the 'halving' phenomenon.
Does 'Bitcoin halving' affect the price of Bitcoin?
In the crypto community, there are various arguments.
One school of thought contends that the lower inflation rate caused by decreasing supply will benefit the Bitcoin price. However, for Bitcoin's price to rise, demand must remain constant at each halving event.
Some, on the other hand, believe that halving does not generate demand, even though supply decreases over time. All of these are expert and analyst predictions. However, these are just theories, and we'll have to wait and see how things play out.
However, it is worth noting that Bitcoin was designed to be valuable. Bitcoin has a limited supply of 21 million coins, and inflation is kept in check by slowing distribution with halving events.
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