Bitcoin Halving is a special event that occurs once generally every four years. Started by the creator of Bitcoin, Satoshi Nakamoto, previous events were held in 2012 and then 2016. As such, the next Bitcoin Halving is estimated to occur in May 2020. Through this article, we hope to aid you in your understanding of this key event.
The Bitcoin Halving & Miners
Let’s first begin with the Bitcoin Halving process, where block reward will be halved. Every few minutes, bitcoins are added to the circulating supply when a block of bitcoin transactions is solved by miners. In the past, block reward was 50 bitcoins before it was reduced to the current reward of 12.5 bitcoins. Next year, the total number of bitcoins mined by miners per block will be halved further to 6.25.
This process supposedly helps to maintain the price of Bitcoin by periodically reducing block reward and keep inflation under control. It also increases the cost of mining with higher difficulty level and fewer rewards. When expenses exceed profits, miners are likely to leave, allowing the system to constantly adjust itself. Bitcoin Halving is one of the two measures that Satoshi Nakamoto implemented for the bitcoin protocol for a sustainable system. The other measure was to limit the supply of bitcoins.
According to analysts, bitcoin is likely to reach its maximum supply by 2140. There is a finite supply of 21 million, and about 17 million have been mined currently. When all possible amount has been mined, miners would have to rely on transaction fees then. However, an interesting fact is that not all bitcoins are available in the market. About one-third are assumed to be lost while close to one million bitcoins are held by Satoshi himself.
What will happen to the price of Bitcoin?
If you are a trader, there could be volatility during that period. During the 2016 halving event, there was an increase in bitcoin price from $650 to $675 after a week. However, the price wasn’t much affected in 2012. Nevertheless, the value of bitcoin might increase due to shortage of supply.
Apart from the halving, market news could also affect cryptocurrencies. For example, the announcement of Libra has likely caused the price of Bitcoin to rise. This year, there has been a recovery in bitcoin price and could continue to grow over the next few months.
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