What Is The Bitcoin Halving
Many of us who are now in the crypto space were attracted by the news of Bitcoin and how it continues to grow in price every year. While it is an inflation rate like any other currency (meaning new coins are minted each day), it is still a deflationary system as the number of coins created become less and less with time up until the last Bitcoin is mined.
We recently hit the milestone of 18 million Bitcoin in 10 years and 3 million to go, as their will only ever be 21 million Bitcoin. However, the next 3 million BTC will take a total of 120 years to produce, with the last one being minted in 2140.
So how do ten years get you 18 million but 120 years will only add 3 million more? Well, a lot of it has to do with the Bitcoin having process.
What is a bitcoin halving?
The Bitcoin halving or halvening as some like to call it is an event that happens once every 210 000 blocks. Once 210 000 blocks are added to the chain, the rewards miners receive for doing their work is cut in half. Miners will earn 50% fewer rewards for their work, meaning that less Virgin bitcoin is created.
The current reward for completing a Bitcoin block is 12.5 Bitcoin, but it will be reduced in the next halving to 6.25 coins per confirmed block.
When is the next bitcoin halving?
The bitcoin halving already happened 18 May 2020, when the number of blocks hits 630,000.
Why are Bitcoin halvings important?
The theory is that as less Bitcoin is added to the system, the ones currently in circulation become more valuable over time. The limit on new supply means owners will charge higher prices if demand remains strong.
While we can see that as Bitcoin becomes more popular and having gone through three halvings, we've seen price growth, it's by no means a consistent uplift.
Looking at circumstances surrounding each halving, we see different behaviour due demand for bitcoin and prices can fluctuate wildly around this time.
Less is more
As current BTC owners continue to HODL, as we see more and more, BTC lost forever in wallets and cold storage. We will see the circulating supply continue to shrink as time goes by.
We will also see more Bitcoin locked up in the Liquid and Lightning side chains removing them from the main circulation. These side chains will require liquidity for the time being as they are used to settle specific smart contracts.
All these reasons, along with the halving, will bring even more scarcity to the market. Couple with it the irrational FOMO in the crypto space and you have a recipe for real price action. We could see it be the catalyst for new all-time highs and continue to push the currency to new heights
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