One of Bitcoin’s main features is the process known as Bitcoin Halving. The main purpose of this process is to regulate the issuance of bitcoins to control currency inflation. In other words, it seeks to limit the supply so that demand grows and therefore strengthens the cryptocurrency.
How does Bitcoin Halving work? To understand this process, it is necessary to understand how the Bitcoin system and its blockchain work since this halving process affects miners. These people are in charge of validating all the transactions that take place on the Bitcoin blockchain. Their job is to add the crypto transfers into separate blocks that later become a whole chain with information from the entire network.
Due to the amount of energy and computer power that this activity requires, miners get a Bitcoin reward for each block they validate in the network. After each Bitcoin Halving, this reward is reduced by half. In 2009, when Bitcoin started, the reward for each validated block was 50 Bitcoins. After the first Halving, in 2012, it was reduced to 25 Bitcoins and in 2016 it dropped to 12.5. Once this year’s reduction is made, the reward for each block will be 6.25 Bitcoins for each miner.
When did it happen? This last Bitcoin Halving happened in May 2020. The date of each process is not previously established since it depends on the number of blocks mined in the network. After every 21,000 validated blocks, a reduction takes place. The estimated time between each process is about four years, therefore the next Halvings are expected to occur in 2024 and 2028 respectively.
The last two Bitcoin Halvings happened amid very high expectations from all the crypto world enthusiasts. These processes have also caused an increase in the price of Bitcoin in both 2012 and 2016. For example, in 2016 the price of Bitcoin before the Halving was around $650. After this process, the price went up to $20,000, although it later dropped to $3,200. Something similar happened in 2012 and the result is expected to be the same this year.
Another example of the high expectation generated by this event has been the searches of users on the internet. Over the past few weeks, the term “Bitcoin Halving” has reached its highest peak of searches in the Google search engine. This confirms the interest that it generates in people and the high expectations that are had with this event.
Bitcoin Halving is such an important process for the Bitcoin system. So far, it has fulfilled its main function to perfection, which is to prevent currency inflation. Reducing the mining of Bitcoins will help to generate a lower supply of coins, which should result in greater demand and higher prices. It is also important to highlight that the Halving doesn’t have a direct impact on the price of Bitcoin since it does not depend on whether there are many or few Bitcoins in circulation but on the public demand in the market.
