What is Bitcoin Halving?
Bitcoin halving is the natural occurrence in which bitcoin retrieval drops by half per block. This is normal because since bitcoin was invented the existence of halving was already programmed. Bitcoin is programmed to have only 21 million bitcoins in its entire lifecycle. It can be compared to gold which is also limited in number. To understand more, let's first learn how to minimize bitcoins.
It is minimized in the way of solving mathematical problems through computers. The mathematical problem is the so-called Blocks. Where every block the miner solves has a reward, it is bitcoin. Each block has an equivalent amount of bitcoin. When bitcoin started in 2009 the reward per block was 50 BTC.
What is the use of Bitcoin Halving?
Halving was done to control inflation. Inflation is the devaluation of money or its ability to buy. An example of inflation is the mickey mouse money during the Japanese period here in the Philippines. It is called mickey mouse money because it is almost worthless.
If you buy a bag of rice you also have to pay for it with a bag of mickey mouse money. So its very low value is also due to the excessive amount of mickey mouse money made by the Japanese. And the same thing is happening in our fiat currency today.
Every year the value of our money decreases. Did you notice that our peso used to be able to buy two candies? Our ten pesos can buy a package. Now with some candy that your peso can buy, can your ten pesos still buy a wrapper?
In bitcoin, on the other hand, gold is being replicated where the number is limited and as more and more discoveries become more and more difficult to find. The result is deflation, in which the value increases because supply is limited while demand remains high (law of supply and demand).
What is the impact of Halving on the price of Bitcoin?
Bitcoin is only designed to have 21 million bitcoins in its entire lifecycle. It is very different from fiat money which can easily add numbers by making central banks. Because of this it can be compared to gold and other precious metals which are only limited in number and as time goes on it becomes more and more difficult to find. If banknotes or fiat money are inflated, the value of the currency decreases, bitcoin is programmed to have deflation, the value increases.
That is because of the law of supply and demand. When there is a demand and the supply goes down, the value of something naturally increases. If we base our supply on demand and demand, we can assume that the value of bitcoin will increase every time the halving takes place. But the law of supply and demand is just one of the things that affect the value of bitcoin.
Some other things that affect the value of bitcoin are the people's acceptance of bitcoin, the good and bad news about bitcoin, the rise and fall of the value of fiat money, mining, accepting or releasing large businesses in bitcoin, increase and decrease the value of other cryptocurrencies, government regulation (legalize or illegal) and so on.
What is the impact of Halving on miners?
Miners are the reason why bitcoin is increasing circulating around the world. Whenever halving happens the miners are one of those affected. Its effects can be positive or negative. Some experts say halving miners could go bankrupt. To be able to mine bitcoin, you need special computers / hardware, electricity, internet, facilities, maintenance, employees and more. Because of those expenses, they also have to earn a lot for the basic needs of the mining farm. If there is a halving, their income will be reduced by -50% BTC / Mining Power. The current life of mining farms depends on the value of bitcoin after halving.
It will be recalled that when bitcoin started in 2009 it was possible to mine only through ordinary computers because the rewards were still high at that time and the blocks were still easy to solve. After the halving in 2012, special computers / hardware were needed to mine. Today large mining farms are mined.
If the value of bitcoin falls after halving there will be many lucrative mining farms. If the price of bitcoin stays at its previous price before halving, they can still go bankrupt. And one is the Bitcoin Mining Firm KncMiner which closed in May 2016 due to the impending halving in July 2016.
CONCLUSION:
The positive that can happen is if the value of bitcoin increases after halving.