What you Need to Know About Bitcoin Halving

Bitcoin went through its third halving on the 11th of May 2020, which meant that bitcoin miners now get half the price they used to get. The price dropped from 12.5 BTC to 6.25 BTC per block after the halving. Bitcoins are created or mined by people who contribute power to secure the network and ensure it is constantly functioning.

These so-called miners use expensive electronic equipment to earn or mine these coins to ensure there’s enough available. However, roughly every four years or after 210,000 blocks, the price that miners can win is halved. This system is estimated to continue until the last bitcoin is mined in 2140.

The halving system was designed for many reasons, all of which point back to maintaining the value of bitcoin. It was first designed to help with the quick distribution of coins to encourage more people to join the mining network.

However, the value of bitcoin has been estimated to increase as the network expands, which is why the block rewards have been designed to be halved at intervals. At the end of the day, miners would most likely still be getting value, even with the halved price, considering how bitcoin never follows the default inflation rules of other currencies.

The total maximum supply of bitcoin is 21 million. This finite supply is one of the reasons why the halving system exists, as it helps reduce the rate at which new coins are mined or created. With a lesser available supply of bitcoins in the market, there is less tendency of exhausting the 21 million coins any time soon.

This could also inevitably lead to an increase in price and value, considering the demand for bitcoin has also been on the rise. Since the third halving happened in May, the amount of bitcoin mined in a day has reduced by 50%. Some people have argued that it might affect the computing power connected to the bitcoin network, as some of the miners might become inefficient due to the price reduction.

However, there’s every cause to believe that the value of bitcoin will increase and bitcoin may achieve a better growth between now and its fourth halving in 2024. This is based on its track record over the years and with the results from the first and second halvings. At both times before now, there were massive surges in the price of bitcoin.
The first halving in 2012 saw an increase in the price of bitcoin from $12 to about $1,150 within a year. The second halving in 2016 saw bitcoin price to almost about $20,000, which eventually dropped to $3,200.

The halving system will be here for a long time but to make bitcoin trading more sustainable in the coming years, we have to work on the scalability and regulation of bitcoin. Software such as bitcoin champion and other technologically advanced tools have made this better since the second halving in July 2016. With the improvement in technology, it only gets better from here, and in 2024, when the fourth halving happens, we might have a better bitcoin story to tell.

Related Articles