What is Bitcoin halving? No, not having Bitcoin, it’s Halving bitcoin. What does it mean? When does it bitcoin halving happen? What happens to the value of Bitcoin when it does happen? Well, stick around here at MakeAnAppLike, we’ll answer these questions and more.
A Bitcoin halving event is when the reward for mining Bitcoin transactions is cut in half.
When Bitcoin was created in 2009 by Satoshi Nakamoto, they designed a way to distribute new bitcoins without a person or group of people deciding who should get them. The idea, called bitcoin mining, was to reward people with new bitcoin for doing the work of verifying new transactions into new blocks through computational work. For a better understanding of mining, check out our article on Forbes? Suffice to say that a new bitcoin is created as a reward for minors verifying blocks in the blockchain. When Bitcoin started, the reward was set to 50 coins per block. But Nakamoto put into the protocol a rule where every 2100 blocks, or roughly every four years, the reward would be cut in half and so is named a having event.
Bitcoin halving history
|First Bitcoin Halving
|Nov. 28, 2012
|$12 to $1,217
|Second Bitcoin halving
|July 9, 2016
|Third Bitcoin Halving
|Dec. 17, 2018
|Recent Bitcoin Halving
|May 11, 2020
- The first bitcoin halving occurred in late 2012 when block number 210,000 rewarded 50 coins to the winning minor.
- But then block number 210,001 only rewarded its winning minor 25 coins.
- The second Having event occurred in mid-2016, having the block reward again.
- So the reward for block number 4200 in one came in the amount of twelve and a half coins.
- The next bitcoin halving is expected on Mar 02, 2024
- And so it will go until sometime near 2040 when all 21 million bitcoins will have been mined.
The mysterious Satoshi Nakamoto, who created Bitcoin, mined the first block of the blockchain on January 3, 2009, also known as “Genesis Block” or “Block 0”. The original block reward for Bitcoin was set at 50 BTC by its inventor. In those early days, anybody had no significant incentive to mine Bitcoin, and Satoshi was essentially the lone miner. However, BitcoinMarket.com became the first Bitcoin exchange on March 17, 2010. Due to the increase in interest in the new currency as a result, the price of Bitcoin topped $1 in the spring of 2011.
|3 January 2009
|Block reward, BTC
|BTC created per day
Details of Bitcoin Halving 2012
|28 November 2012
|Block reward, BTC
|BTC created per day
|BTC price at the start
|BTC price 100 days later
|BTC price 1 year later
5 Steps to Understand the effect of bitcoin halving
|The reward is halved ->
|half the inflation ->
|lower available supply ->
|higher demand ->
|higher price -?
So why the change? Why not keep the reward the same? Isn’t that unfair to the miners? The answer to that question lies in the law of supply and demand. If the coins are created too quickly, and there’s no end to the number of bitcoins that can be created, eventually, there will be so many bitcoins in circulation that they would have very little value. Vitalik Buterin, who was at the time of this episode, the lead developer of the Ethereum Project, wrote an op-ed piece for Bitcoin magazine and explains the need for slowing the distribution of bitcoins through Having this way.
The main reason why this is done is to keep inflation under control. One of the major faults of traditional fiat currencies controlled by central banks is that the banks can print as much of the currency as they want. And if they print too much, the laws of supply and demand ensure that the value of the currency starts dropping quickly.
Bitcoin, on the other hand, is intended to simulate a commodity like gold. There is only a limited amount of gold in the world, and with every gram of gold that is mined, the gold that still remains becomes harder and harder to extract. As a result of this limited supply, gold has maintained its value as an international medium of exchange and store of value for over 60 years, and the hope is that bitcoin will do the same.
Okay, but I’m sure you’re asking what will happen to the value of my Bitcoin. Well, the short answer is nobody knows. In 2016, a week after the event. Not much happened to the exchange rate of Bitcoin against the US. Dollar, where bitcoin was trading at around $650 at the time of the event. A week later, the rate was about $675. So not much of a change. Many believed that the anticipated rise in price occurred between three months and a year ahead of the event itself, where bitcoin was trading around $300 a year prior and $430.03 months before it occurred. But that was a different time.
Adding to the mix the media attention and subsequent public awareness spike in 2017, the exponential growth of ICOs and new coins in the marketplace, government regulations, and restrictions, not to mention futures and derivative offerings, opened up doors for institutional investment. And it becomes quite the task to predict what effect the next event will have on global exchange rates.
The important thing to remember is this bitcoin was designed to be valuable first, in that there will only ever be a specific number of them in existence, and that inflation in bitcoin’s economy is kept in check by slowing its distribution through the process of having. I hope this gives you a better idea of what bitcoin is and why it’s an important feature of what gives bitcoin its value.
Now, you may still have some questions. If so, just leave them in the comments section below.
The next bitcoin halving is expected on Mar 02, 2024.
The bitcoin halving results in a reducing the reward for the creation of new blocks and bitcoin mining.