What is Bitcoin Halving, and how does it work?
Every four years, an event called "Bitcoin Halving" occurs on the Bitcoin network.
But what exactly is this?
Well, you see, on the blockchain, miners validate and add blocks to the blockchain network by solving complex mathematical problems. In return, they get rewarded, mainly with the network's native currency, for their effort.
Similarly, Bitcoin miners who validate transactions are rewarded with Bitcoin on the blockchain network.
But here's the thing: Bitcoin's anonymous creator, "Satoshi Nakamoto," coded that the block reward should be halved after every 210,000 blocks added to the Blockchain.
And since it takes 10 minutes to add a block to the chain, if you run some simple calculations, you'll see it takes a day for 144 blocks to be added and roughly four years for each halving.
Initially, the block reward was 50 BTC per block, but after the first halving on November 28, 2012, it was reduced to 25 BTC per block.
And progressively, as shown in the picture below.
Why was this implemented?
I can't say for sure since I'm not the creator. But here's a theory: From the law of supply and demand, if a coin is created too quickly, there will be too many in circulation. As a result, it will have very little value.
It was probably employed to ensure there wasn't an over-issuance of Bitcoin.
Due to increased scarcity, which potentially leads to higher demand and upward pressure on the price, each halving drives up the cost of Bitcoin. With the next one coming soon, in April 2024, there's likely a bump in the Bitcoin price again.
And it's a wrap. If you found this insightful, do give a clap, and don't forget to subscribe to my newsletter, where I'll be breaking down complex web3 topics.
