Ever heard about the term Bitcoin Halving? If not, then you have come to the right place. Learn everything about what is Bitcoin Halving and other important information about it.
But before we dive straight into the topic let us first understand how Bitcoin actually works.
Bitcoin Network Explained
Bitcoin basically operates on Blockchain networks. Blockchain mainly consists of a large number of computer software networks that contain Bitcoin software and are responsible for keeping a track of all the transactions occurring in a network.
Each node in a blockchain network is responsible for completely rejecting or approving a transaction. This process is done in accordance with a series of checks which the node conducts to reject or approve the transaction.
A transaction is approved only when all the nodes operating in the bitcoin network give a green signal. If for some reason, any one of the nodes does not approve the transaction, the transaction is automatically marked as disapproved.
The more the number of nodes in a blockchain network, the higher is its stability.
At present, there are 12,035 nodes present in the bitcoin network of blockchain.
What is Bitcoin Mining?
Talking about Bitcoin mining, people use it in their computers as a transaction processor and validator when they participate in Bitcoin’s Blockchain network. The miners are ought to prove that they have put in efforts in processing transactions in order to be rewarded, this system is called Proof of Work (PoW). The effort involves the energy and the time that goes into solving complex questions and running the computer hardware.
Few companies have designed computer chips, solely for the purpose of mining, keeping in mind the fact that faster computers with a certain type of hardware yield larger block rewards. These computers are used for processing Bitcoin transactions and are rewarded for doing the same.
With reference to the way precious metals were gathered, the term mining has not really been used in the literal sense.
Bitcoin miners along with confirming the legitimacy of a transaction also solve mathematical problems. Thereafter they add these transactions to a block and create chains of the blocks of transactions, ultimately forming the blockchain.
Further, when a block is filled up with transactions, the miners that processed and confirmed the transactions within the block are rewarded with bitcoins.
An important point to note is that transactions having greater monetary value require more confirmations for security purposes. This is the process of the mining as the work performed by them to get new bitcoins out of the code in the digital world is similar to the work done by miners to take gold out of the Earth’s surface.
Now that we know what is Bitcoin and how does Bitcoin Mining occur, let us now have a look at what is Bitcoin Halving.
What is Bitcoin Halving?
It is a known fact that there are a lot of Bitcoin miners are there out in the market. Thus, whenever 210,000 blocks of Bitcoin are mined or after every four years, the rewards given to the miners is cut in half for processing transactions.
Simultaneously, the rate at which blocks are released is also cut in half.
It is projected that this concept of Bitcoin Halving will continue until the year 2140.
Bitcoin Halving is important because a drop in Bitcoin’s dwindling supply is marked by it. The maximum number of Bitcoins which can be circulated or supplied is only 21 Million.
Up until August 2021, there are only 2,200,869 million Bitcoins that are left to be mined.
In 2009, the reward was 50 bitcoins for each block being mined in a chain and as of May 2020, this reward has been reduced to 6.25 Bitcoins.
What Happens When Bitcoin Halving Occurs?
“Halving” in terms of Bitcoin refers to how many Bitcoin tokens are found in a created block. Going back to 2009, when Bitcoin was launched each block contained 50 BTC, this number however was set to reduce by 50% every four years. Presently, after three halving events, each block now contains 6.25 BTC. It is believed that when the next halving occurs, a block will only contain 3.125 BTC.
When Have the Halving’s Occurred in the Past?
On November 28, 2012, the first Bitcoin halving had occurred after a total of 10,500,000 BTC had already been mined. The second one occurred on July 9, 2016, and the latest had occurred on May 11, 2020. It is expected that the next one will occur in early 2024.
Does Halving Affect Bitcoin Price?
Ever since its launch in 2009, the bitcoins price has been on a steady and significant rise. As of April 2021, Bitcoin is being traded at $63,000.
Since halving the reward doubles the cost of mining to the miners, it has a positive impact on Bitcoin’s price.
There are several pieces of evidence from the past which indicate that the bitcoin’s price increases much before it is actually halved.
What Happens When there are no more Bitcoins Left in a Block?
It is projected that in the year 2140, the last of the bitcoin’s which are left in the block will be mined by the miners. After this point, the halving schedule ceases to exist as no more bitcoins will be left to be mined.
However, miners will still continue to validate and confirm new transactions. The price of the transaction fees paid to the miners will continue to rise as there will be an increase in the number of transactions and add to the fact that the market value of Bitcoins will also increase.