If someone has followed the cryptocurrency space for over a year, he would have definitely heard about the most awaited event in cryptocurrency- The Bitcoin Halving. Yes, it is a life-changing event for the largest cryptocurrency that happens approximately every 4 years and Bitcoin just experienced its 3rd halving on Monday, May 11th, 2020. A Big Congratulations
For all those who are new to this, Halving is an event the occurs when every 210,000 blocks on the bitcoin blockchain are mined (which is nearly every 4 years) and the reward that a miner receives for processing transactions is also reduced to half of what they used to previously receive. Halving was written into the cryptocurrency’s code by its creator, who is known as Satoshi Nakamoto, to control inflation.
This is the third halving since Bitcoin’s creation in 2009. The first took place in November 2012, and the second in July 2016. The next halving is due to take place in May 2024. At this pace, the bitcoin’s system will continue until around 2140 and at that point, miners will be rewarded with fees for processing transactions that network users will pay
If we look back in history, In 2009, the reward for each block in the chain mined was 50 Bitcoins. After the first halving it was 25, then 12.5, and come May 11th, 2020 it has now become 6.25 Bitcoins per block.
While halving is an important event for all crypto enthusiasts, it does change a few facts every time the event occurs. Here is a list of facts that matter when the halving event happens
- Mining becomes more challenging with reducing rewards. : It’s a well-known fact that the Bitcoin supply is controlled to a limit of 21 million Bitcoins. With limited supply, there is always a chance of inflation playing out. To counter this Satoshi Nakamoto, built in a system that could control this inflationary pressure. With Halving happening every four years and after every 210,000 blocks are mined, the reward for mining Bitcoin is projected to go down by 50%. This happens because bitcoin’s algorithm automatically adjusts mining difficulty (the amount of computational power required to solve problems to demonstrate proof-of-work and find a block). So that means mining Bitcoin will become more difficult for miners.
- Rewards fall from 12.5 BTC per block to 6.25 BTC per block: As the name suggests, from now on, the number of Bitcoins per each block mined will be divided by half. Till the next halving which may happen sometime in 2024, BTC miners will receive 6.25 Bitcoin for every block they mine, which is equivalent to about $62,000 at current prices. In2024, this will further go down to 3.125 BTC per block
- Miners will be the most impacted: Theimmediateimpact of halving is on the miners that mine the bitcoin blocks- the people who control the hash rate that helps protect and discover Bitcoin blocks. Halving would immediately impact the revenues of miners and if the prices of Bitcoin take some time to adjust, the miners may face some economic impact at least for some days till the prices come back to normal. While since the event was already known and miners would have taken care of this impact, still unpredictable price movements can always take things out of hand.
- Halving during a global pandemic makes this event even more special: While both 2012 and 2016 were interesting halving events, 2020 becomes even more special as the world is currently dealing with a global pandemic which is pushing the world slowly towards an economic recession like situations, which many believe would be much worse than the 2008-2009 recession that led to the birth of Bitcoin. This recession-like situation may test Bitcoin’s core thesis and principals as an aggressive monetary policy from global central banks may trigger inflation of money supply
- Other major cryptocurrencies may soon undergo halving: While Bitcoin halving is complete, other crypto coins may soon follow Bitcoin and move towards halving. Litecoin is the next coin that will undergo halving on Mon, 03 Jul 2023 while Bitcoin Cash and Bitcoin SV will undergo halving in April 2024. This will bring a deflationary impact in the crypto economy as many major coins would reduce their mining rewards.
A successful bitcoin halving for the third time just proves the strength of the program on which Bitcoin is built on. While the prices haven’t moved much since the halving event, you never know when is the next spike coming. Even if we keep the prices aside, a rare moment like this deserves some recognition or at least a congratulation.