Halving Bitcoin: what it is and why you need to?

As you know, the offer of Bitcoins is limited. The network will create only 21 million coins. This is one of the main reasons why Bitcoin is often called “digital gold”: the number of yellow metal in the world is also limited, and sooner or later it will be extracted completely.

Now in circulation is approximately 18.22 million BTC, meaning that 86 percent of the maximum sentence. But that doesn’t mean that cryptocurrency will soon reach the limit. From the very beginning in the Protocol of the blockchain is programmed every 210 000 blocks will occur so-called halving or “halving”. This reduction of the remuneration of miners to create new blocks in the Bitcoin blockchain, which ensures the operation of the network.

To be precise: according to the Protocol, the reward per block is reduced twice. Thus after each halving Bitcoin miners start to receive confirmation of the transaction to 50 percent less BTC.

The contents

What is the block reward for cryptocurrencies?

This is the number of bitcoins that the miner receives for adding new block in the blockchain.

To explain more, see the basics of Bitcoin – the blockchain. The blockchain is a digital registry that stores information about all transactions in the form of blocks with a size of approximately 1 megabyte each. For example, if user a sends bitcoins to User B, that transaction is stored in the block along with hundreds of other transactions, recorded around the same time period.

Topic: What block is Bitcoin and what does its size.

So the reward for a block is the sum of the cryptocurrency received by the miner for the creation of a new unit, that is, finding a solution that will allow the unit to be in the blockchain. It is a reward for his efforts.

The reduction in the remuneration of miners for mining bitcoins. Source: 2Биткоина

How much will bitcoins to miners after the following halving?

At the moment the reward is 12.5 BTC. But from may 2020, with each unit will be created only 6.25 BTC.

Initially, the fee was eight times more. After the launch of Bitcoin in 2009, the miners get for each block of 50 BTC. Thus before the first halving held in November 2012, it was produced 10 500 000 BTC, then the miners began to receive for each block of 25 BTC.

It may seem that this award was too generous — about 500 thousand dollars per unit at the current price, but then the network was just beginning to develop, and no one knew for sure whether people justified the attachment of the computing capacity of their computers in the Bitcoin blockchain. Incidentally, this is the real scenario of loss of funds.

Also note that in that period the highest market price for 1 BTC reached 31 dollar until June 2011, but then the bubble burst and at the end of the year Bitcoin went back to 2 dollars. But in the end mining was much more profitable for those who joined early on, why Bitcoin critics call it a pyramid.

The second halving of Bitcoin took place on 6 July 2016 — on the block number 420 000. Since then and until today the miners get per block to 12.5 BTC.

Miners. Source: 2Биткоина

When is the next halving Bitcoin?

Based on the current dynamics of the network in mid – may 2020.

While the exact date is unknown because the creation of new blocks can speed up or slow down. On average, the network produces one block every ten minutes, though sometimes this figure can even reach two hours.

For a countdown to halving Bitcoin you can follow the link.

Countdown to halving. Source: Binance.vision

Last halving is expected to be around the year 2140, when namine 21 millionth bitcoin. Next, the miners will no longer receive remuneration for the units, but will continue to receive rewards in the form of transactional commissions.

Text topic: What is mining Bitcoin in 120 years?

What happens with the miners after the Bitcoin halving?

Some small players may be forced to leave. Or at least update the hardware.

Now a large proportion of Bitcoin mining accounts for such giants as the Chinese company Bitmain. Bitmain mines the blocks with a thousand powerful, but energy-consuming machines known as ASIC miners, which are much more effective compared to the equipment used by Amateurs or retail miners.

It is worth noting, retail mining is almost non-existent, so how does one find a block Bitcoin is physically impossible. Therefore, many private miners join large mining pools, providing its processing power.

ASIC miners. Source: 2Биткоина

When the reward per block will be much less, barely covering the costs of the mining hardware will be forced to leave the market. Some firms will continue to be interested in Bitcoin mining, even with a smaller reward, but as a consequence, the market may become less decentralized the network is concentrated in the hands of fewer miners, which will be rewarded. However, there may be a new, more efficient ways to mine BTC which will allow you to participate and small businesses.

Interesting to read: How a Bitcoin halving can spell disaster for the miners.

As halving will affect the exchange rate of Bitcoin?

In the past the price after halving after a few months of growing, but everything depends on the ratio of supply and demand. And to say that the growth rate occurred because of havinga hard. Still factors too much.

In fact halving reduces the Bitcoin new offer of BTC, making the asset more rare. If the demand remains the same, the price is likely to rise. There are historical precedents. 28 Nov 2012 – in the first day of halving Bitcoin – the price of the cryptocurrency has risen from 11 to 12 dollars, after which continued growth and a year has reached 1038 dollars.

Previous halving Bitcoin in 2012 and 2016. Source: Bytwork

A month before the second halving the price of bitcoin began to detect a similar bullish behavior. From 9 June to 9 July, 2016 – the day when the reward per block for the second time in the history of the asset is reduced to half – price jumped from 576 to 650 dollars. Again, BTC continued to rise over the next year, though with some hesitation, and on 9 July 2017 traded at 2526 dollars.

Repeated this time the same? Skeptics believe that halving already included in the price — you remember the spectacular, but short-lived increase in prices this year and in the summer of 2019? Nevertheless, scientific proof is impossible. Moreover, the industry over the past four years has changed dramatically, and cryptocurrencies – particularly Bitcoin – were regularly covered in the media.

Anyway, there are those who want to gamble on the growth rates, considering the previous halving Bitcoin. If history really will repeat itself in April 2020, the price of Bitcoin starts to rise, due to fear of lost profits , the asset may begin to buy even more traders that will stimulate demand and with it price.

In our cryptodata progressive miners you will find lots of other useful information. And go to our Yandex Zen.

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