Let’s understand bitcoin halving in detail in this article, so before we begin, first lets talk a bit about bitcoin. Bitcoin is a virtual currency or a cryptocurrency which is designated to act as payment without the need of any financial institution to be engaged in a monetary transaction.
Bitcoin was introduced by a developer named Satoshi Nakamoto in the year 2009, when it was made public. It has been becoming popular since then, and to our surprize, the value of bitcoin has increased drastically in the last 5 years. The value of one bitcoin in the year 2018-2019 was somewhere close to 2 Lakh or 2.5 Lakh which has now increased to 65 Lakh.
The very first bitcoin was mined on 3rd January 2009, and the value is halved every four years. The first reward was halved in the year 2009 getting 50 new bitcoins. The most recent bitcoin halving occured in April 2024, and the next bitcoin halving would occur in the mid 2028.
A blockchain in simpler terms is a large database of information that is combined together with some cryptographic programming techniques. This distributed information is stored in multiple pieces in different computers rather than a centeralized server or computer.
The term block means a part of the whole blockchain which contains some information like block headers, transaction counter and a list of transactions recorded in that block. with the help of transactions it can be figured out, how many transactions actuallu took place for any piece of block. These blocks are regularly transacted from one computer to another and thats how the whole sysytem of blockchain technology works.
How To Mine Bitcoin?
To mine bitcoins successfully, various hardwares and softwares are used. It was very easy to mine a bitcoin using a personal computer at the time of release of this bitcoin currency, but when more and more people joined the network it started to become very difficult to mine bitcoins using just basic computers or technology.
Bitcoins can be mined using a personal computer, if you how to solve hashes. Well, hash is a mathematical function or a program that converts an input of any length into an encrypted output which is of fixed length. Hashing is a technology that analyses how the data is encrypted and shared with other people on the network. To mine bitcoins successfully, you must have the knowledge of hashing and reading the encrypted data that is transfered over the network.
Bitcoin Halving
In the ecosystem of bitcoin mining, bitcoin halving is considered a good thing due to ample reasons:
Inflation
One of the key concerns for Bitcoin halving is dealing with the inflation in the country. Inflation is termed as an economic condition where the purchasing power of the citizens descreases and the amount of goods that can be purchased with the same amount of money also decreases. In US the average inflation rate is 2% which is acceptable and financial institutions. also target this percentage for the growth of economy.
Bitcoin halving is helps in maintining any inflation in the country by lowering the reward amount through bitcoin halving and maintaining scarcity for the bitcoin in circulation. However halving does not protect the bitcoin users completely from the repercussions inflation as they need to convert their bitcoin currency into a fiat currency that is used in that particular country.
Rise in Demand
After each halving activity when the number of bitcoins available is reduced to half, the prices generally goes up, due to the reason that it is not able to meet the demand it generates. Therefore making it still a scarce resource in circulation. after every cycle of halving the prices for a bitcoin goes really high making it a good thing for investors to speculate on.
More Investments
when the bitcoin was launched, it was not released for the purpose of making investments in it, but it was more a currency that would probably become fiat currency in many countries, which has already been done in some of the countries. It was an attempt to reduce dependency on third party agencies or institutions for making payments and doing transactions.
It became popular as an investment opportunity once it got hicked among the investors and speculators that there is a huge potential in stocking bitcoin in a long run. The sudden spike in the prices of bitcoin after every halving event gave surity among the investors that there would be great rise in the value of bitcoin and the same has happened in the past few years.
Bitcoin Mining
Bitcoin mining is done by a group of people or companies which are called miners. They carry out the bitcoin mining process with the intention of generating profits through the increase in the value of bitcoins. during the event of bitcoin halving, the rewards are cut down, but still the endeavor to invest in the bitcoin never lasts among the investors due to the reason that the chancges in the prices remains steady.
The large scale mining activities require high quality of equipments and softwares to continue making profits from the bitcoin. Anyone who wishes to generate ample amount of profits need to upgrade their systems annd invest heavily in hardwares and softwares to remain competitive regardless of changes in the market.
Conclusion
A bitcoin halving is an event that occurs every four years in which the bitcoins rate is cut into half of the price when it was released in the circulation. The reward system will continue to work like this untill the bitcoin reaches its proposed limit of 21 million.
In 2009, when the first bitcoin was launched, the reward was 50 coins in each block chain mined. post that four halving events occured, of which the recent one occured in April 2024, which reduced the reward to 3.125. The latest event of bitcoin halving occured on 19th April 2024 and the same is expected to occur in 2028. For more details and to read about more such content, do follow investmentgroww and take your investment journey to the next level.
