Although Bitcoin is arguably one of the biggest players in the industry, the growth of the crypto market as a whole has taken away some of the attention from the early giant, especially as they have introduced new structures and incentives for the users of their blockchains. That said, when anything major happens to the larger assets, it’s bound to make waves for everyone in the community.
One of the developing stories that is starting to make headlines is the impending halving of Bitcoin. For those who are new to crypto and who are unsure of whether to be concerned or excited for this event, what is Bitcoin’s halving and why is it making waves?
What Is the Halving?
A rule developed during the birth of Bitcoin, Bitcoin will only have 21,000,000 coins in circulation, a number that will eventually be reached when all of the bitcoins have been mined by those using the network. However, in order to keep all of the bitcoins from being mass-produced all at once, Satoshi Nakamoto wrote the code to dictate exactly how much bitcoin would be released over a set period of time.
As you may have guessed, a halving reduces the allowed creation of bitcoins by half, which reduces in a 50 percent cut of the overall production rate that is currently taking place now. The most recent cut took place in 2016, which saw the block rewards cut down from 25 to 12.5. This coming halving will take the rate down from 12.5 to, you guessed it, 6.25 bitcoins per block. This was designed to make sure that inflation didn’t become an issue if the project was able to take off.
This code is set in stone, meaning that we know to expect this halving to take place later this year. But what does it mean for those who are heavily involved in the industry?
How Will It Affect Bitcoin?
There are arguments on both sides that this halving could result in severe consequences or result in great news for the markets. On one side, it is true that the halving will result in fewer profits for miners, which can be problematic considering that mining takes a significant amount of electricity and special hardware to achieve. On the other hand, halving events in both 2012 and 2016 have resulted in positive price swings for the crypto market, which means that we may once again see the price of Bitcoin jump up again once the halving event takes place. However, much like many other aspects of the crypt industry, only time will tell.
Although there are many new crypto structures that do not implement this system, Bitcoin was one of the earliest, meaning that we still have to abide by its rules while it is at the top. If you have heard about the bitcoin halving but don’t have enough information, use the guide above to get a simplified overview of what this event is and what it may mean for the industry as a whole.