Everything you need to know about Bitcoin halving
Bitcoin, despite being a finite resource, is the most valuable crypto asset in the market. To help the coin stay valuable over time, a pivotal event happens every four years. This is called Bitcoin halving.
As the name suggests, during this event Bitcoin, and the reward for mining them are cut in half. This pushes the coin’s price upward. Bitcoin halving is part of the programming underlying the virtual asset to keep its total supply fixed.
If you are an investor, this is great news for you! It is suggested that you take advantage of this event to make the most out of your crypto, especially if you want to grow your portfolio by doing activities such as playing games in Bitcasino live casino.
To keep you up to speed, the next Bitcoin halving is estimated to happen by 2024. Learn more about it here:
What is Bitcoin halving?
Every four years, an estimated amount of 210,000+ blocks are mined. As a part of the coin’s programming, crypto miners will have their processing transactions cut in half. It is referred to as halving or ‘the halvening’ because it reduces the number of bitcoins entering circulation by half. It’s Bitcoin’s way of enforcing synthetic price inflation until all bitcoins are released.
As years pass, the effect of each Bitcoin halving will lessen as the reward eventually reaches zero. It is estimated that this system will last until the year 2140. A total of 21 million coins will be mined at that point.
Users will then pay fees to miners, as a reward for processing transactions. Keeping the network running requires miners to pay these fees. Why is this event so significant you may ask? This event is important because it is the mark that another drop in the rate of new coins is being produced as it continues to reach its finite supply.
What happens during a Bitcoin halving?
Bitcoin halving is a monumental event many investors look out for. It sets off a chain reaction that helps users to benefit from it. But what exactly happens during a halving? Here’s how the process works:
- Halving Bitcoin is, as mentioned, built into the Bitcoin blockchain network’s protocol. This means it is a feature meant to be part of its system. This is a critical component of how Bitcoin works.
- The network increased the incentive for early adopters to start mining by diminishing mining payouts about every four years.
- As each Bitcoin halving decreases the rate of inflation, the price of Bitcoin in lieu increases.
- Early on when Bitcoin entered the market, the incentives were relatively substantial, which probably attracted more miners.
- As the rewards are reduced (lower available supply) with time, more miners compete for those rewards (higher demand).
- This adds more hashing power to the network and also ensures that the market isn’t flooded with Bitcoin all at once.
- Despite receiving fewer incentives, miners still have an incentive because doing so increases the value of Bitcoin.
What would happen if halving didn’t occur?
If Bitcoin halving did not occur, miners will have no incentive to go through the process. This means that the value would not be high enough. Additionally, any processing transactions instead of this would be smaller.
As a precaution, there is a procedure in the Bitcoin network that alters the difficulty of earning rewards from mining known as the halving. To help out miners, this level of difficulty will be brought down a notch to help and keep miners motivated. The payouts will be cut in half but the value of the coin remains. Although fewer coins are in circulation that are given out as rewards, transaction processing has become easier. So far, this method has been effective in two cases.
In relation to past halvings, the crypto’s price has always ballooned and was followed by a large drop for both miners and investors to profit from. However, even after the halving events, prices remain higher than before.
Even though this strategy has been successful thus far, future market reactions to the halves are uncertain because they are frequently accompanied by a great deal of excitement, guesswork, and volatility.
What are the effects of Bitcoin halving on the parties involved?
Obviously, since halving is such a huge event in the crypto sphere, several parties in the network are highly affected by it. Here is a rundown of how stakeholders and miners are affected:
Miners
The mining capability for Bitcoin is allegedly inversely correlated with its price. This affects Bitcoin’s ecosystem weirdly. First, there will be a diminishing supply of the coin which increases the prices and demand. However, because they may find it challenging to compete with huge mining companies, smaller mining operations or individual miners may find it difficult to exist in the coin’s ecosystem as a result of lesser incentives.
As a result, the ecosystem of a cryptocurrency has fewer miners when its price rises and vice versa. There is a possibility that a halving event may increase the possibility of a breach into the network of Bitcoin because of the exit of the miners.
Investors
Bitcoin halving has always brought good news to investors. This is because, as explained, the event proceeds to increase prices for the crypto due to the decreased supply and increasing demand.
All trading activity on the crypto blockchain intensifies as halving proceeds. However, as previously shown, the circumstance and statistics surrounding each price halving affect how quickly prices rise.
When were the past halvings?
Halving only occurs every four years once a certain amount of block has been mined. In relation, the first-ever halving happened back in November of 2012. During this time a grand amount of 10 million Bitcoins were mined.
The second halving proceeded back in July 2016. The next event was in May 2020. With this ongoing pattern, the next Bitcoin halving is set to happen in early 2024.
Why do halvings occur less than every four years?
There is a reason why these events only happen every four years. It has something to do with the amount of time it takes to discover and mine blocks. Due to the mining algorithm of Bitcoin, an estimated time of 10 minutes is how long it takes to discover new blocks. However, the more miners that join the network, the faster the process as the hashing power gets boosted.
To fix this, the mining difficulty, or how tough it is for a computer to solve the mining algorithm, is adjusted around every two weeks to bring back a 10-minute objective. The average time to locate a block has constantly stayed below 10 minutes even while the Bitcoin network has grown enormously over the past ten years.
When is the next Bitcoin halving event?
There is a limit to how much Bitcoin can be in circulation. After the 21 million coin cap is met, no additional Bitcoins will be issued. The most major implications of reaching this supply limit are probably going to be felt by Bitcoin miners, but it’s still feasible that Bitcoin investors might suffer negative consequences.
With approximately 900 new Bitcoins mined each day, faster mining rates have led to higher mining rates, so it may be more. According to projections, the last fractions of Bitcoin will be mined in 2140. As halvings continue, the rate of Bitcoin supply rise will decline until all 21 million BTC have been mined.
With this as the basis, the next halving is likely to occur in early 2024 — at which point, a miner’s payout will be reduced to 3.125 BTC.
What will happen during the next halving?
Based on previous Bitcoin halvings and their undeniably amazing effects, there is a great chance that there will be more investors this coming 2024. As seen in previous halvings, there has always been a massive surge in the price of the coin.
A Bitcoin halving is a much-anticipated event that has been happening every four years. As mentioned, it’s part of the programming underlying the virtual currency to keep its total supply fixed.
Despite the fact that past half occurrences have resulted in major price swings, nobody can truly predict what will happen after the halved and in the days, weeks, or months that follow.
With this, it is important to consider the growth of the network and not just the specific and estimated date of the next halving.
Invest in Bitcoin
Halvings are the perfect opportunity to invest in Bitcoin. This is because the coin’s value is doubled due to its set programming. Many of its users and investors will make use of this opportunity to profit and you should too. You can further profit by investing in activities such as playing Bitcasino slots and live dealer games.