Recently, more and more information appears that after halving, the cryptocurrency grows in price, however, given the fact that not everyone clearly understands the essence of this process, you should familiarize yourself with it in more detail.
A logical question may arise – why is halving needed at all?
This tool is primarily used to control monetary inflation. The main advantage of bitcoin over fiat money is that the number of coins is initially known, while traditional money, if necessary, can be printed indefinitely. The total number of coins is 21 million, with 87% mined so far.
What is halving?
Viktor Dorokhov, an expert of the Digital Economy program at RUDN Institute of Economics and Economics, explains that not all cryptocurrencies are deflationary in their economic model. But the very first cryptocurrency in the world – Bitcoin – is just that. This seems to be possible through halving.
The program code of the main cryptocurrency itself contains a mechanism according to which the reward is reduced every 210 thousand blocks added to the network, that is, confirmed transactions. Thus, it turns out that halving occurs every 4 years. At the same time, the maximum possible issue of Bitcoin is limited to 21 million, and the last coin will be mined in 2140.
Of course, halving is an extremely effective mechanism for a deflationary economy, therefore, for maintaining and increasing the value of the underlying asset: despite high volatility, since its creation and generation of the first block in 2009, Bitcoin has only grown literally from zero to more than 61.7 thousand dollars in the moment.
Why Halving?
Halving is a decrease in profitability for the production of a new block planned by the system. This feature allows you to reduce coin inflation, which would be caused by excessive mining, as explained by Martin Petkov, an analyst at StormGain, a platform for trading, buying and storing cryptocurrencies.
Halving is usually accompanied by an increase in the value of the cryptocurrency, so traders and investors keep track of the date of the alleged event for purchases. So, on May 11, 2020, the Bitcoin halving reduced the reward for a mined block from 12.5 BTC to 6.25 BTC, after which the price of the coin increased from $9,000 to $30,000 by the end of the year.
Each network has its own rules regarding the period for reducing profitability. For example, in Bitcoin, a halving occurs every 210,000 blocks, and the next one is expected in May 2024, as mentioned above.
Bitcoin Halving
As for the frequency of bitcoin halving, it is written in the cryptocurrency code that every 210 thousand blocks the reward will be halved.
Given the fact that it takes about ten minutes to generate one block, halving occurs every four years, and the last, third halving in the history of bitcoin, took place in May 2020. It is worth noting that at the time of the first halving in 2012, the price of bitcoin was $12, while during the second and third, it reached $650 and $8,700, respectively.
The fact that the generation of bitcoin is halved, and the demand remains at the same level, suggests that the price of the cryptocurrency should increase. Hoping for another native after halving, many seek to make money on this, however, the rate is growing solely because of this belief, and not at all because of real demand.
Bitcoin mining and price forecast
The Bitcoin halving, the halving of the block reward, occurs every 4 years, to be more precise, every 210,000 blocks, as Sergey Arestov, co-founder of BitCluster, explains.
Bitcoin has already experienced 3 halvings in its history.
Before the halving in 2012, miners received 50 BTC per mined block, after which the reward decreased to 25 BTC. After the halving in 2016, the reward was reduced to 12.5 BTC. On May 11, 2020, the issue per mined block was 6.25 BTC + transaction fee. Now it is about 0.75 BTC
Since bitcoin is a deflationary payment system, and less and less of it is mined every day, its value is growing higher and higher. In 2140, the last bitcoin remains will be mined. But it will be possible to continue to work for a reward from transactions – transaction fee.
As planned by the creator, by this time the whole planet will use bitcoin and 1 bitcoin can cost more than a billion dollars, and the reward for the commission in the block will be significant.
Therefore, miners will continue to solve the mathematical problem of choosing the right hash in order to close the block of transactions and receive their reward. Thus, the miners will continue the fierce struggle for the mined block.
Where can I see when the next halving is?
The expected date of the next halving is May 5, 2024, according to Viktor Dorokhov, an expert of the Digital Economy program at the RUDN Institute of Economics and Economics
- See when the next halving can be found here: academy.binance.com.
- You can also follow the countdown on one of the most popular cryptocurrency trackers Coinmarketcap.
- The most convenient site with a countdown to the new halving, according to Martin Petkov, is Coingecko. All coins are available on it, between which you can quickly switch. For example, by changing the end of the line bitcoin_halving to bch_halving or zcash_halving.
