Why Everyone is Talking About the Bitcoin Halving
07 May 2020, by Bittrex Team
You might have heard about the Halvening before. Although it sounds ominous, it’s actually a bit of a celebration for the blockchain community, as it only happens every 4 years.
Here’s a few things you should know about the Bitcoin Halving.
What is it?
About every 4 years, or 210,000 blocks of Bitcoin mined, the amount of Bitcoin produced per block (or block reward) is cut in half. When Bitcoin first started, the block reward was 50. As of now, the block reward is 12.5, and will decrease to 6.25 after the Halving. It will continue to halve until the block reward is at 0.
Remember, Bitcoin is finite: there will only ever be 21 million Bitcoin produced. Therefore, every time a halving occurs, the Bitcoin that remains becomes scarcer and, historically, more valuable. This means that by 2140, there will be no more Halvings and Bitcoin will have reached maximum scarcity. For some, this idea of timed scarcity paired with a decentralized network of nodes is part of the reason Bitcoin has value and can sustain use over time.
In previous Halvings we witnessed a major increase in price in the following years. However, part of the excitement of the Halving is we don’t know what will happen. The price of Bitcoin can go up or down. If the price of Bitcoin goes down, for instance, it may be harder for miners to become profitable and may reduce incentives for them to contribute to the network.
What does Bitcoin history say?
The Halving marks a crucial step in Bitcoin history because, due to the increased processing power needed with more scarcity, the coin becomes more difficult to mine, and a new, delicate balance for miners will likely be struck. Mining will be more demanding, but if the price increases as it has historically, they may still be profitable.
While many people speculate on the price, the only thing we can be sure of is the increased scarcity of Bitcoin that will follow a Halving.
Overall, the Halving will change the Bitcoin landscape forever and only time will tell how the price will be affected or if adoption will continue to increase. Regardless, now is the time to continue to get people interested in Bitcoin, as the more interest there is, the stronger the social construct behind Bitcoin becomes.
What does this mean for you?
- Bitcoin is permanent: The Bitcoin you already own will never change, and that’s important! No matter how many Halvings happen, the Bitcoin that has already been produced, and its properties, will stay the same. However, if you are new to buying Bitcoin you may be entering a period where the demand is higher.
- Bitcoin is infinitely fractional: You don’t have to buy whole Bitcoin. It is, and always will be, available to buy in pieces.
- You don’t have to do anything with your current Bitcoin: As long as you understand how to manage your security and store it safely, your Bitcoin will be just fine.
The changes to price, mining, and adoption of Bitcoin that will come with halving are complex and, as of now, unknowable. However, the basic structure of what’s happening is simple:
- 21,000,000 of Bitcoin will be produced in total
- Halving events occurring every 210,000 blocks (approximately every 4 years)
- After the Halving, the Bitcoin produced per block will be 6.25 instead of 12.5.
- Bitcoin will continue to be cut in half each Halving, until approximately the year 2140, at which no more Bitcoin will be produced because the block reward will reach 0.
Knowing these takeaways is the most important part of understanding the Halving
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