Bitcoin is one of the most popular cryptocurrencies. It was first launched in January 2009 by a computer programmer or maybe a group of programmers under the pseudonym Satoshi Nakamoto, whose actual identity has never been verified. Bitcoin despite being a digital currency money, it can’t be created endlessly.
So, in the core of the Bitcoin protocol, there lie two fundamental concepts related to scarcity. Firstly it is that the total number of Bitcoins will never exceed 21 million, and by late 2020, less than 2.5 million Bitcoins remain to be virtually 'mined.' Secondly, the rate of adding new Bitcoins to the network will be reduced by half every four years which is where the Bitcoin halving event plays a significant role.
A "block" is referred to a file that holds Bitcoin transactions, kind of like keeping track of who sent money to who. Miners are like competitors who want to add the next block to this list. They do this by solving a tricky math problem with their special computers. When they solve it, produce a random 64-character output known as a “hash,” and it locks the block so no one can change it. In return for doing this work, miners get some Bitcoin as a reward.
Before getting into the excitement and buzz about Bitcoin having events all round, let's learn what exactly it is? A bitcoin halving is basically an event where the reward for mining new blocks is halved, which means miners receive 50% fewer bitcoins for verifying transactions.
In 2020, 12.5 new Bitcoins were introduced through virtual mining in approximately 10 minute block time. Subsequently, in May, this quantity was reduced to 6.25. By 2024, it will decrease to around 3.125, and this will continue till all 21 million coins have been mined, which is estimated to occur around the year 2140.
Due to the halving of bitcoins, Bitcoin's price is likely to rise in the future. This is completely in contrast to fiat currencies as it typically declines in value over time through inflation. As part of Bitcoin's protocol, halving maintains scarcity, and scarcity is one of the reasons that millions of people seek out Bitcoin. In short, less Bitcoin available means the remaining ones become more valuable, drawing in more investors.
So, let us dig in more and get a clarity on the significance of Bitcoin Halving:-
Scarcity: Bitcoin halving mainly reduces how fast new coins are made which makes it rarer. This scarcity boosts demand and makes Bitcoin more valuable.
Inflation Control: This also helps control inflation by slowing down how quickly new Bitcoin is available. By reducing the block reward, it limits the amount of new Bitcoin entering the market. This controlled approach is meant to maintain Bitcoin's stability and long-term value.
Economic Impact: Due to halving, miners have to change how they work because they get fewer rewards, which makes competition tougher and less efficient miners might quit.
Price: When Bitcoin's supply decreases and demand goes up, before halving events, the price of Bitcoin has gone up in the past. But however, it is important to remember, what happened before might not happen again as the BTC price is influenced by more than just halving events.
2009: Bitcoin mining began with rewards set at 50 BTC per block.
2012: The first Bitcoin halving event cut mining rewards in half to 25 BTC.
2016: The second halving reduced mining rewards further to 12.5 BTC.
2020: Following this, the third halving sees mining rewards drop to 6.25 BTC.
2024: The fourth halving is about to happen which will reduce mining rewards to 3.125 BTC.
2140: Lastly, the 64th and final halving will occur and no more new Bitcoins will be created.
As of now, there have been three Bitcoin halving events that have occurred prior. The first took place on November 28, 2012. During the first halving event, the price of Bitcoin was $12.31. At the second halving event, which occurred on July 9, 2016, it stood at $650.63. The third event happened on May 11, 2020, and the price reached $8,590.
However, it should not be misinterpreted that the rise in price is only because of the halving event as there are several other factors that can impact the price.
At the press time, the BTC is currently trading at