Bitcoin Halving and What Does it Mean For Cryptocurrency
Cryptocurrency has become an increasingly popular subject over the past five years, both for those who see it as a viable investment opportunity and those who see the potential of the innovative projects set out by Alt-cryptos such as Cardano (ADA), Ripple (XRP) and VeChain (VET). But Bitcoin remains the ‘top dog’ of the crypto world. It was its ground-breaking blockchain technology that kicked off this multimillion-dollar industry and the value of Bitcoin has reached as high as $63,729.5.
Bitcoin just experienced another significant event in its history with a halving that has taken place last year, so what impact will that have on crypto’s golden child?
To be able to understand Bitcoin halving you need to understand the basics of how the Bitcoin network functions, as well as Bitcoin mining.
- Bitcoin functions on blockchain technology which uses various nodes that run Bitcoin’s software, containing a partial or complete history of transactions in its networks.
- Each of these nodes deals with approving and rejecting transactions on the Bitcoin network.
- To determine whether to approve or reject a transaction, the node checks whether the transactions contain the correct validation parameters.
- The transaction only occurs when all parties on the Bitcoin network approve it within the block.
- After approval, the transaction is recorded to the existing blockchain and then sent out to other nodes. Each transaction is encrypted in the network.
The basics of Bitcoin mining:
- Bitcoin mining is when people use their computers to participate in the blockchain by using their systems as a transaction processor and validator.
- Using a proof of work system, miners are rewarded with bitcoin. The system means miners must prove the effort they put into process transactions to gain this reward. The effort is based on the time and energy used to run the hardware to complete and solve complex equations.
- Larger transactions reap larger Bitcoin rewards for miners.
What Is Bitcoin halving?
Bitcoin halving is when after a period of approximately four years or after 210,000 mined blocks, rewards given to miners for processing transactions are cut by 50%. It cuts the amount of Bitcoin being released into circulation in every four-year cycle. It is a synthetic form of inflation that halves every four years until the whole supply is released into circulation.
The significance of the halving is due to it marking the next drop in Bitcoin’s supply. The total supply is 21 million and at the time of writing 18.8 million bitcoins are already in circulation, leaving a finite supply left to be mined.
The rewards of each block in the chain mined have reduced significantly since 2009 due to halving:
- 2009 the reward= 50 bitcoins
- 2012 the reward= 25 bitcoins
- 2016 the reward= 12.5 bitcoins
- 2020 the reward= 6.25 bitcoins
What effects does Bitcoin halving cause?
As halving represents this dwindling supply of Bitcoin, once it occurs the price of Bitcoin soars over the next yearly period. Examples of price being directly affected by halving can be seen across all the years that halving occurred.
- 2012–2013 saw a rise from $12 to $1,207
- 2016–2017 saw a rise from $647 to $19,345
- 2020–2021 saw a rise from $8821 to $63,558
Bitcoin halving basically means lowering the available supply which in turn increases demand and therefore the price soars. This ensures there is still an incentive for miners, as although the reward is decreased, the value of Bitcoin has increased, making it still profitable.
Bitcoin halving is also a main driving force in what many refer to as the bitcoin four-year cycle. This represents a trend in which many believe Bitcoin reaches a new ATH (All Time High) in its value every four years, also providing an unusually bullish market for the wider crypto market.
What will happen when the total Bitcoin supply is mined?
Once the 21 million Bitcoins have been mined the halving four-year cycle will come to an end as no more mining will be possible. But this doesn’t leave these miners ‘out of a job’ as there will still be incentives to continue to validate and confirm new transactions on the blockchain, such as the value of fees paid to miners.
Depositing and Withdrawing your Cryptocurrency with STICPAY
STICPAY offers a fantastic e-wallet and payment solution that allows you to deposit and withdraw your cryptocurrency quickly, safely and at minimum fees.
With cryptocurrency’s popularity continuously growing, more businesses are beginning to accept crypto as a valid method of payment, encouraging more customers to use decentralised cryptocurrencies.
Via STICPAY’s e-wallet solution, both merchants and users can deposit, hold, convert (crypto-to-crypto and fiat-to-crypto), transfer, and withdraw crypto conveniently. Furthermore, the company’s smart algorithms monitor over five global exchanges to provide the best conversion rates for its customers.
As well as offering a great way to deposit and withdraw cryptocurrency, STICPAY offers cashback services for forex traders and online betting.
Ready to take control of your cryptocurrency with STICPAY, join here!
Originally published at https://sticpay.com on November 1, 2021.
