What is Bitcoin halved? Analysis of Bitcoin halving!

Dec 02,2022
What is Bitcoin halved? Analysis of Bitcoin halving!

What is Bitcoin halved? Analysis of Bitcoin halving! Bitcoin is a decentralized network that allows value to be transferred between parties. It does this by using a secure network of "miners", who host nodes (computers that store copies of BTC ledgers). As a digital asset, only Internet access is required to participate in Bitcoin network. The asset itself can be used as both a means of payment and a means of storing value.

What is Bitcoin halved?

For every 210000 blocks, or about every four years, the number of bitcoins generated in each block is reduced by 50% in algorithm. The block rewards will not be gradually reduced, but will be halved immediately after the 210000 blocks are mined.

Half for the first time

The first half of Bitcoin was 210000 Bitcoins on November 28, 2012, reducing the reward of Bitcoin from 50 Bitcoins to 25 Bitcoins. Assuming 144 blocks are mined every day, this event will reduce the daily reward from 7200 Bitcoin to 3600 Bitcoin.

Half for the second time

The second bitcoin halving took place in 420000 bitcoins on July 9, 2016 - reducing the block reward from 25 bitcoins to 12.5 bitcoins. On a daily basis, the daily reward is reduced from 3600 Bitcoin to 1800 Bitcoin.

Interestingly, the time between the first and second halving is only 1316 days (3.6 years), about 150 days less than the 1460 days (4 years) generally expected. This anomaly can be attributed to the fact that the mining growth exceeds the adjustment of mining difficulty of the network. The mining difficulty is automatically adjusted once every 2016 blocks, that is, once every two weeks; However, this algorithm does not take into account the extremely rapid technological progress.

Half for the third time

The last half reduction occurred on May 11, 2020, reducing the block reward from 12.5 to 6.25 Bitcoin.

When will Bitcoin be halved next?

Most investors believe that the value of Bitcoin will increase and may achieve greater growth from now to the fourth half in 2024. This view is based on Bitcon's records in previous years and the results of the first and second halving events.

Why is Bitcoin halved?

Bitcoin halving is a way for Bitcoin to force composite price inflation until all Bitcoins are released. It is believed that the platform will be built in such a way that it will become a deflationary currency - purchasing power will increase over time.

The 50% reduction of newly minted bitcoin makes the supply of bitcoin follow the deflation curve. As the halving results in fewer mining incentives, creating new bitcoins becomes more and more expensive. Over time, each coin should become more and more valuable. This is in contrast to legal tender such as the US dollar, which tends to lose purchasing power over time.

Another theory behind the halving of Bitcoin is that the creators of cryptocurrency hope to produce more coins as soon as possible to encourage people to join the network as miners.

Is halving Bitcoin good for the market?

Overall, halving is critical to helping Bitcoin realize its value proposition. As mentioned above, the casting process has experienced a reduction of - 50%, allowing Bitcoin supply to follow the anti inflation curve similar to gold and other commodities. Gold has proved to be a better means of value storage than inflationary assets such as fiat money.

In spite of this, although Bitcoin is still difficult to compete with large-scale payment systems due to scale constraints, price fluctuations and complex user experiences, Bitcoin users can maintain confidence in the attractiveness of Bitcoin as a means of value storage due to the halving of prices.

What are the effects of halving Bitcoin?

In the past, the devaluation of Bitcoin was associated with a sharp rise in the price of Bitcoin. The first halving increased from $12 to $1217 in one year. By the second half, the price of Bitcoin was $647. By December 2017 - about a year later - the price of Bitcoin had soared to $19800. The last halving occurred at $8787, and about a year later the price soared to $64507.

The theory behind this chain reaction is as follows: the reward is halved; As a result, inflation has halved; Low available supply; Higher demand; Increased demand drives up prices; As the value of Bitcoin rises in this process, the motivation of miners still exists, although the returns are less.

So you might wonder what would happen if the halving did not increase demand and prices. If the value of Bitcoin is not enough to compensate for smaller rewards, will miners be motivated?

In short, to prevent this from happening, Bitcoin has an automated process to change the difficulty of mining rewards. If the value of Bitcoin does not increase, the difficulty of mining will be reduced to maintain the enthusiasm of miners.

This process has proved successful twice. The result of the price decline is that the price rises rapidly, then falls sharply, and the long-term sideways consolidation. However, the collapse after these rises still managed to keep prices higher than the previous price reduction events.