For anyone who keeps a keen interest in cryptocurrencies very well knows how important Bitcoin halving is for the investors as well as the crypto community as a whole. The two prominent rules that govern the entire Bitcoin network are:
- Firstly, the supply of Bitcoin is finite and limited to 21 Million.
- Secondly, the number of bitcoins generated per block or the miners’ reward is bound to decrease by 50% after every 210,000 blocks.
Designed by Bitcoin curator Satoshi Nakamoto, halving is a significant process in which, after a span of every four years, the reward given to Bitcoin miners for adding a new block to the Bitcoin blockchain is reduced to half. In simple words, halving implies that if a miner is receiving ten bitcoins for solving the complex mathematical operation on a particular Bitcoin block, then after the halving event, he/she will get only 5 Bitcoins until the next halving.
On an average basis, six blocks are processed within an hour by the miners, and halving takes place after every 210,000 blocks; thus, after every four years, the reward gets slashed to half. The cryptocurrency miners earn new coins as a reward for mining a block, and this is how new Bitcoins are added to the network. The process helps to keep control of the price inflation of the world’s first virtual currency, Bitcoin. If the virtual coins are generated at a fast rate, or there is no limit to the number of bitcoins that can be created or rewarded, or added to the network, then the blockchain will be flooded with Bitcoins having no significant value, making the assets worthless.
The last Bitcoin halving took place in 2016, while the first one occurred in 2013. The next halving is scheduled to happen in the present year, i.e., 2020. As per the reports, the event is likely to occur in mid-May, leaving some significant impacts on the Bitcoin community and overall marketspace. Interestingly, as per speculations, if the new halving will have similar repercussions as the 2016 event, keeping aside the drastic changes between the conditions of the 2016 and 2020 industry, then the Bitcoin price will enjoy a surge.
Crypto enthusiasts will be exposed to a period of market volatility. Whereas earlier, the miners used to get 50 BTC as rewards, presently, they receive 12.5 BTC, which is now likely to get reduced to 6.25 BTC after the 2020 halving event. The yearly inflation rate for the coin will reduce to 1.8%. This implies that Bitcoin will become even more scarce after the next 2020 halving. Also, the miners will be able to generate a total of 900 new Bitcoins on a daily basis in comparison to the 1,800 Bitcoins generated per day presently. At the BTC halving 2020, the total Bitcoin supply will be 18,375,000. However, nearly 25% Bitcoins have already been lost, so the actual number of Bitcoins that shall be available would be around 13,700,000.
Bitcoin mining is a complex process that makes miners solve complex algorithms to add new coins to the network. Mining requires costly hardware equipment, heavy energy requirements, and speedy bandwidth connection, which eventually involves a huge investment on the miners’ side. Now, after the upcoming halving event, the reward value will reduce drastically, which is likely to force some miners to move out of the market.
It is assumed that investors prefer to buy assets prior to an important event and so it is opined that after the upcoming halving, the price of Bitcoin will go up. Also, as the number of Bitcoins generated per day will fall steeply, the demand for the asset will rise, causing a surge in price.
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