If you're following bitcoin then you've definitely herd a term 'bitcoin halving' which was trending in last few months. If you're a recent player in game of crypto and not interested in technical things behind bitcoin then probably you've no idea what bitcoin halving is ? But still if you're interested in understanding what bitcoin halving is then this article is for you !! I've tried to put meaning & it's impact on mining network in a simple way.
Things You Should Know
Befor explaining what bitcoin halving is there are few things you should know about bitcoin.
Bitcoin is limited, yes the bitcoin supply is limited that's why bitcoin is also termed as 'digital gold', as gold is in limited amount and we all know the one day all of the gold will be extracted. Similar to the traditional gold the 'digital gold' is also in limited amount (21 million coins) and it'll also be completely extracted someday & there'll be no further supply.
Currently almost 85% of total Bitcoin is mined and only 15% remained. But if you're thinking that it'll be mined in next 5-6 years then wait, stop thinking !! It is estimated that the last bitcoin will be mined in 2140. This is because of algorithms written at early stage & we all know it as 'Bitcoin Halving'.
Bitcoin Halving Explained
In very simple words,"Bitcoin halving is an event that halves the rate at which new Bitcoins are created."
The reason behind this event is the protocol which was coded into blockchain at the very beginning. The protocol performs bitcoin halving after every 210,000 block. This event occurs every four years.
As the rate of creating new bitcoins gets halved after bitcoin halving, it affects the bitcoin miners most. Along with 50% decrease in creating rate, the amount of block reward also gets halved that means after bitcoin halving miners will get 50% less rewards for producing 'block' than the previous rewards.
At the very beginning of bitcoin i.e in 2009 miners get 50BTC in reward per block before the first halving takes place in November 2012. After first bitcoin halving event miners began to receive 25 BTC (-50%) in reward per block.
On June 6, 2016, as the 420,000 blocks get mined second event occurred. After second bitcoin halving miners began to receive 12.5 BTC as a reward for mining single block which is around $90,000 at the current market price.
Next and the recent bitcoin halving i.e fourth event took place in May 2020, which increases the difficulty in mining bitcoin and halved the reward amount for miners to the 6.25 BTC per block which is around $45,000 in current market price.
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