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Bitcoin Halving - what is it and what does it result from?

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Tokeneo
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4 min reading

To better understand Bitcoin's Halving and how it affects the king of cryptocurrencies itself, you need to understand how the BTC network works. Find out everything about Bitcoin halving.

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Bitcoin Halving - what is it?

Bitcoin's blockchain operates on the Proof of Woork consensus, which means it needs computing power to function. More precisely, in order for the network to approve and add further transactions, it must use the computing power provided by the so-called miners, i.e. people who mine cryptocurrencies. In return, they receive a reward in the form of newly dug blocks. Thus, in the simplest terms, Bitcoin's Blockchain works in such a way that the transactions concluded are confirmed by people lending the computing power, in return for which they receive rewards in the form of newly dug blocks. Additionally, the network is designed in such a way that as the users grow, the computing power needed to approve a transaction increases, which means that the more users in the network, the more computing power has to be spent to confirm the transaction. Thanks to this, the industry of cryptocurrency miners has developed, which need more and more power to be effective.

 The final piece of the puzzle called Blockchain Bitcoin is the gratification for miners. It is variable and is divided by half about every 4 years. This is to keep Bitcoin from being inflated. Due to the fact that there is a finite amount of it, it will be more and more difficult to extract, and its price should not decrease, but increase. These features make Bitcoin similar to gold, which is why it is often referred to as digital gold. Coming back to the division, this division is exactly Halving.

How often is Bitcoin halving?

It takes place approximately every 4 years because its exact date is expressed in the number of new blocks excavated, which cannot be clearly transferred to a time unit. To be precise, Bitcoin Halving occurs every 210,000 blocks. The first such event took place on November 29, 2012, when the prize was reduced from 50 to 25 BTC. Another Halving took place on July 9, 2016 and the prize was split from 25 to 12.5 BTC. The next, last split took place on May 11, 2020 and the current reward for digging a block is 6.25 BTC. The next one is expected in 2024. Halving has been quite significant throughout Bitcoin history for miners, traders, and so-called Hodlers.

Halving and the market situation

This is an event closely watched by each of the groups, as Halving is very often accompanied by large fluctuations in the rate. Usually, the Halving fomo brings the course to significant heights, which is very good news for those investing in Bitcoin. Miners, on the other hand, have completely different moods, because their reward, i.e. earnings, are reduced by half. Of course, I am talking about the value expressed in BTC, because if the rate increases significantly despite the distribution of the reward in terms of fiat currencies, miners' earnings may remain at a similar level. So no matter which group of cryptocurrency enthusiasts we observe, Halving always evokes a lot of emotions and is a highly media and publicized event, which we could see recently.

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