Halving is one of the most prominent events that occur on Bitcoin. It usually occurs whenever the reward derived from mining Bitcoin transactions is reduced in half. Don’t forget that Bitcoin comprises a network of computers, referred to as nodes. These nodes are directly responsible for confirming or rejecting Bitcoin transactions. Before a transaction can be confirmed, each node is expected to check and verify if it meets up with the required standards or parameters. Therefore, Bitcoin mining refers to the process of processing and validating these transactions.
Miners usually get incentives for their efforts towards validating transactions on the blockchain. According to the Bitcoin document, the reward system will continue till 2140. That’s the year that the proposed limit of 20 million Bitcoin coins will be reached.
However, this does not mean miners will not be incentivized for processing transactions after the 21 million milestone is achieved. But the reward system will change. They will continue to receive their incentives through fees paid by users of the blockchain so as to keep the network going.
Nevertheless, Bitcoin halving has to do with the existing reward system for miners. It happens whenever the network mines 210,000 blocks. By calculation, this event will take place every four years. Don’t forget that we said earlier that the event is Bitcoin halving because it reduces the rate at which miners mine the token.
When did Bitcoin halvings took place?
Since the emergence of Bitcoin, halving has occurred thrice. The first one unfolded on November 28, 2012. Then, the production rate of miners went down from 50 to 25. Roughly four years later, another halving occurred, reducing the figure to 12.5 bitcoins. This event occurred on July 9, 2016. As for the third one, it happened on May 11, 2020, reducing it to 6.25 coins. We expect the next halving to take shape in 2024.
Why Bitcoin Halving Matters
The halving theory was included in the mining algorithm of Bitcoin to combat inflation. Logically, the initiative is targeted at ensuring the scarcity of Bitcoin. By theory, the gradual reduction of Bitcoin issuance will help enforce the increase of the token’s value if the demand remains the same.
More so, the halving mechanism supports the 21 million supply cap of Bitcoin. Therefore, ensuring that it maintains its verifiable scarcity which is much more important to its value theorem. The halving system to an extent has contributed to the scarcity and soaring value of Bitcoin.
More so, the system has been effective in projecting Bitcoin as one of the most reliable hedges against inflation. Although it doesn’t entirely mean the token is immune to inflation, instead, it has been able to keep it at bay.
Likewise, Bitcoin halving contributed to the strong performance of the token compared to fiat currencies. Governments and central banks can produce more fiats at their disposition, however, the supply of Bitcoin through its halving mechanism remains limited.
While globally recognized fiats are struggling to beat the inflation curve, Bitcoin by a wider margin is containing it. Consequently, it has contributed to the establishment and reliability of Bitcoin as a good store of value. Ensuring that holders against any form of economic decline retain a significant portion of wealth.
Above all, Bitcoin halving facilitated the posture of the token as one of the foremost cryptocurrencies. The coin, over the years, has outperformed most of its counterparts in the virtual assets space. To a noticeable height, the halving mechanism also contributed to this landmark achievement.
Conclusion
Against all doubts, Bitcoin halving has been one of the distinctive features that made it stand out in the crypto market. The limited supply of the token supported by the halving system has gained the trust of investors to pump heavily into Bitcoin.
This is due to the conviction that Bitcoin will continue to remain scarce as a result of its limited production. It is safe to say that Bitcoin halving is the major driver behind the emergence of the token as the largest cryptocurrency by trading volume.
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