The halving cannot be separated from the Bitcoin project because it was believed that this cryptocurrency was created by its founder, Satoshi Nakamoto. This reduction will take place in phases until the last 21 million bitcoins are mined.
Each halving is an event that affects the price of the cryptocurrency, as well as miners and investors in general.
What does “half” mean?
This is the cyclical and pre-determined event that The goal is to halve the mining capacity of the blockchain. For bitcoin, the halving cycle is designed to cut every 210,000 blocks. Statistically, a block is generated every 10 minutes, which makes it possible to drop half every 4 years.
If Bitcoin is the first ecosystem to use halving, others have taken over this mechanism to adjust it to their operations. This is especially the case for Litecoin or Dash.
However, it should be noted that halving cryptocurrencies do not necessarily follow a 4-year cycle. For example, Helium and its HTN code have planned a two-year cycle.
How it works ?
This process is relatively easy to understand. The issuance of BTC tokens will halve each time. The same goes for rewards. Mechanically, this causes token scarcity, i.e. supply decreases. Thus, the demand will increase, which in theory will support the price of the cryptocurrency.
As for the story, in the beginning, as of January 3, 2009, the reward offered was 50 BTC for a cycle of no more than $30. When the first halving happened on November 28, 2012, the reward was halved to 25 BTC at a price that was hovering around $100. At the end of this first halving, more than 15 million BTC out of the 21 million planned had already been created.
The second halving occurred on July 9, 2016, increasing the reward to 12.5 BTC. The third halving was created on May 11, 2020 with a reward of 6.25 BTC against a cryptocurrency that traded around $25,000.
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Looking ahead, we anticipate the fourth halving scheduled for 2024 with a reward set at 3.125 BTC. The final halving will start in which the last 328,125 bitcoins will be mined in 2028 for a maximum reward of 1.5625 BTC.
What is the purpose of the half?
Concretely, if this process is not performed, The maximum supply of bitcoin could have come very quickly. In fact, all BTC will already be mined and traded. This situation will not be interesting at all for the palace. Since there is nothing left for me, they will only receive transaction fees as compensation. This provides unattractive profitability for the latter.
Finally, thanks to the half, The Bitcoin ecosystem has perfected its supply of new tokens and maintains relative attractiveness. Because even if the mining wage has been reduced over time, the price of the token has increased exponentially since its inception.
What is the effect of this mechanism ?
As part of Bitcoin, We generally observe the creation of a “rise race” after the halving. This is also one of the reasons why these events are causing such ire in the cryptocurrency space.
This is not an absolute truth because this process has already caused the price of their tokens to drop in price.
On the miners’ side, their wages are lower at each half. Although prices are rising in the long run, this is enough to frighten some miners. This also affects the level of network security.
Conclusion: what do you expect from the half?
Even if the rewards decrease with each half cycle, this process still has a bright future. It will be necessary to wait until 2140, the date of the last Btc mining, so that the minors do not receive any more new tokens, but are satisfied with the fee through the transaction fee only.