A process known as bitcoin halving occurs approximately every four years. Bitcoin investors consider this to be a monumentally important event, since it has a profound impact on the digital currency in a number of ways, including the price.
How does the halving of Bitcoin work? Essentially, it is an event that occurs when Bitcoin rewards for transactions are halved. While the investors are aware of the approximate date and time when it will occur, no one knows for certain when it will occur.
When you store coins in your online Bitcoin wallet, ready to invest, you should familiarize yourself with Bitcoin halving and its peculiar characteristics.
The halving of bitcoins is a phenomenon, but why does it occur?
By halving Bitcoin in half, the number of coins in circulation will not increase too rapidly. But what is the significance of this?
To better understand Bitcoin and Bitcoin halving, you must first understand one of the most important characteristics of cryptocurrency. It is specified in Bitcoin’s source code that there is a finite number of bitcoins. The total number of bitcoins is 21 million.
At that point, the mining of Bitcoins is complete, and no more Bitcoins can be mined. Investments in Bitcoins, however, will continue. So far, approximately 19 million Bitcoins have been mined. Approximately 2140 will be the year when the last coin will be mined.
The average Bitcoin block is added every 10 minutes or so. However, every four years, these block sizes are reduced by half. To put it another way, Bitcoin’s block size is halved every four years.
Bitcoin’s circulation rate is halved every 210,000 blocks mined. However, why is this an important fact? There are fewer bitcoins. Through halving the coins, users will be able to take advantage of a scheduled drop in value and will be encouraged to continue mining.
The halving of Bitcoin in the past
In the past three months, the Bitcoin price has halved three times. A first event was held in November 2012, a second in July 2016, and a third in May 2020.
Following the first halving, the block reward went from fifty to twenty-five coins, and the reward per block is currently six and a quarter coins.
As soon as the next Bitcoin halving occurs in 2024, the reward will be 3.125 per single block, and we will already have 94% of bitcoins in circulation. It is expected that 99% of Bitcoins will have been mined and will be in circulation by 2032.
Halving the value of bitcoin and its implications
There is no doubt that halving Bitcoin is vital for delaying the inevitable, which is mining the last bitcoin, but there are other reasons why these events should be of interest to investors as well.
First of all, all three Bitcoin halvings have been associated with significant increases in Bitcoin’s value. Following the first Bitcoin halving, the price of Bitcoin increased by 3700%, and this upward trend continued in the following events.
There is, however, no guarantee that the next halving of Bitcoin would have the same result. The miners would not have any incentive to mine if the price remained the same or decreased.
It is good to know that there is a backup plan in place if the Bitcoin price does not increase as a result of the halving. A change in the difficulty of mining will be made to the blockchain network. As a result, complicated mathematical equations would become easier to solve and, as a result, would require fewer resources.
How will the world be affected if the last bitcoin is mined?
Firstly, there will no longer be halving events for Bitcoin. It is, however, unclear whether that means Bitcoin is also doomed. The opposite is true.
However, miners may not find any Bitcoins, but they will still have the incentive to validate and confirm new transactions on the blockchain since these processes incur a fee. There are a few additional considerations that should be taken into account as well.
During mining, the process may slow down. In light of the halving of Bitcoin rewards, miners may be forced to divert their attention to other projects.
Additionally, we should consider that the landscape of cryptocurrency is constantly evolving and that it is difficult to predict what the system will look like by the time the last Bitcoin is mined.
Make preparations for the next Bitcoin halving
When the next Bitcoin halving occurs, the coins in your online Bitcoin wallet may be worth hundreds or even thousands of times more.
Nevertheless, there are no guarantees, so unless you have any better ideas, it is probably not the best strategy to simply hold onto them until then.
On the other hand, if you have no plans for the coins and were given them as a gift, maybe it would be wise to use them. Conversely, savvy investors and miners will prepare for the next halving and all that it may bring.
