About Bitcoins we have been hearing for years now: if until not long ago it was something that could be defined as the outsider of finance today this is no longer the case. The most popular and globally known virtual currency has been introduced since 2009, and if at first it appeared to be a far-fetched idea today that is no longer the case.
In this article we take you on a discovery of one of the phenomena behind Bitcoin: the halving Bitcoin.
Halving bitcoin: what is it
The term halving when dealing with the cryptocurrency affects a process that involves reducing the rate at which new coins are issued. What does it mean? Trying to explain in simple words for Bitcoin halving what it is, we could say that it acts by halving the reward for mining new blocks: the blockchain is thus reduced by half.
Bitcoins are generated constantly but have a limit that cannot be exceeded, in their generation of 21 million, more cannot exist. Every 210,000 blocks the halving of bitcoins occurs.
It is important to keep in mind that theHalving is a scheduled event: it occurs about every four years since the introduction of bitcoins; the last one was in May 2020 while the next one is scheduled for spring 2024, assuming the pace is maintained. It entails, essentially, that the reward allocated to miners for mining new blocks of the blockchain will result in half: the famous halving.
How halving works
The Bitcoin halving mechanism has already been set up by Satoshi Nakamoto, the originator of bitcoin. An identity that hides a pseudonym, in fact, behind which lies (according to rumors present for years) an expert in high finance, although there are several who speak of the collaboration of several people.
The operation is simple, as we have mentioned. Summarizing:
- The not-to-exceed limit of Bitcoins that can be mined or mined is 21 million.
- Coins are generated continuously.
- Each time a miner discovers a new block he earns coins to compensate for his work.
- Every 210,000 blocks halving occurs.
- The moment a protocol has passed halfway, the supply of new Bitcoins is halved.
- Production bonuses from the miner's block are also halved.
- The rate at which new coins are issued is also reduced.
- For the miner it means a halving of the reward obtained for mining new blocks.
This is how bitcoin halving works, expected, as we have been seeing, since the introduction of cryptocurrency. Why, one wonders? What are the reasons why halving is so essential? We discuss this in the next section.
The importance of halving for bitcoin
Halving is important because it is the Bitcoin's only monetary policy measure, since it allows the creation of new Bitcoins to be halved.
Satoshi Nakamoto found it necessary to include. the halving Bitcoin to make sure to preserve fiat currency from becoming extremely inflated: by codifying an upper limit for Bitcoin Nakamoto allowed no one person to inflate the supply of Bitcoin at will, generating chaos.
The phenomenon of halving btc goes contextualized than the birth and introduction of cryptocurrency. In 2009, no one knew how successful the financial product could be, if anyone would adopt it. Halving turns out to be a functional procedure for the acquisition of Bitcoins, stimulating demand before exhaustion occurs.
Bitcoin halving represents an essential factor for investors to consider. Therefore, the effects of the last halving, which took place in May 2020, are all yet to be understood. While there have been no particular shocks in the short term, the evolution of the btc trend is still to be understood. A virtual currency that has volatility as one of its characteristic features.
History of halving
We conclude our excursus on halving bitcoin by telling you more about the history of this phenomenon, so as to understand it even better. Let's look at the top moments:
- 2008. Satoshi Nakamoto conceptual level idea of Bitcoin. He also envisions halving.
- 2009. Bitcoin launch.
- 2010. First bitcoin exchange (for acquiring two pizzas).
- November 2012. First halving.
- 2013. The largest speculative bubble occurs with respect to the price of Bitcoin, the value of which rises from $13 to $1,150, with gains capable of increasing by 8.700% in less than a year.
- July 2016. Second halving Bitcoin.
- 2017. Bitcoin's second big speculative bubble: price increases from $900 to nearly $20,000: more than 2000% within a year.
- May 2020. Third halving.
- 2021. The price of Bitcoin gained a +250%, rising from $20,000 to nearly $70,000.
What are the forecast? The next Bitcoin halving is scheduled to take place between April and May 2024, so that should be noted, given the current trend. Our history data shows that it is going through a downward phase, the price of Bitcoin having increased less and less since the last halving.