Bitcoin is the trending talk globally, whose publicity has spread like a forest fire. People are inquisitive about the bitcoin trade regardless of the associated risks. They want to delve more and more into the crypto business and earn a hefty fortune from cryptocurrencies. In the past few years, bitcoin has experienced a wide array of journeys, in both good and bad terms.
Fundamentals of Bitcoin Mining
Bitcoin is introduced into circulation by a process called mining. Bitcoin miners solve complex mathematical algorithms using powerful computers to generate cryptocurrencies like bitcoin. On successful mining and authentication of a bitcoin transaction, after websites like http://thenewsspy.technology carry out a trade, a block is created that gets added to the blockchain.
Followed by this, the miner receives a reward in the form of bitcoins. Now, there is a catch about the number of bitcoins a miner gets. This is where bitcoin halving comes into play, and we will learn more about it in the rest of the article.
What is Bitcoin Halving?
So we know that a miner is rewarded with bitcoins on each successful bitcoin mining. There is a limit to the number of bitcoins the miner gets as a prize but the number does not remain uniform. Initially, a miner used to receive 50 bitcoins for each block that he could process successfully.
After the first halving, the reward got reduced to 25 bitcoins and then to 12.5. Bitcoin halving last occurred on May 11, 2020, which decreased the reward value to 6.25 bitcoins. This process of a subsequent reduction of the bitcoin reward for miners is termed as bitcoin halving.
How does Bitcoin Halving Work?
At the very beginning, during bitcoin’s creation, Satoshi Nakamoto had set a finite number of 21 million cryptos that could remain in the bitcoin circulation. The miners authenticate bitcoin transactions all over the globe and, in return, get bitcoin rewards. After successful mining of 210,000 blocks, the value of the prize depreciates to half.
By May 2020, 630,000 blocks were successfully created. It approximately takes four years to mine a set of 210,000 blocks. So we can say that the value reduces to half after every four years. It is predicted that the next halving will occur in the year 2024. Once the limit of 21 million is reached, there would be no more bitcoins for rewards. The limit is anticipated to be exhausted in 2140.
Why does Bitcoin Halving Occur?
We can infer from the above discussion that bitcoin creation will stop once the 21 million mark is reached. Bitcoin halving reduces the number of bitcoin rewards during each mining, making bitcoin a more scarce and valuable asset. Although the reward gradually decreases, the price of each bitcoin increases inversely. The rise in value and price gives the miners an incentive to mine more.
Possible change in the bitcoin halving pattern
As the number of miners is increasing, the network is spreading. This, in turn, adds to the hash power. Usually, it takes about 10 minutes to mine one block and add it to the blockchain but, with the increased number of miners and added hash power, the time taken for mining would also subsequently reduce. The calculation of 4 years for each halving is based on the 10 minutes taken for mining one block, but if the average mining time reduces, it will also cause the time to mine 210,000 blocks to reduce. Hence, there lies a possibility that halving may occur in less than a four-year interval.
Bitcoin halving will continue to take place until the last block is mined. Once this happens, miners will stop receiving bitcoins as rewards, and there will be a fee levied on transactions carried out by the network users.