Before we answer the question of what halving is, first let’s briefly talk about the very essence of bitcoin + the technology behind it, figure out how it all works: what is a block, blockchain, who are the miners, what do they get rewards for, etc.
What is Bitcoin?
Bitcoin is a digital currency that can be transferred to another person, pay for a product or service. The main ideology of cryptocurrency is the impossibility of control and management.
Bitcoin is decentralized – there is no regulator. An example in the classical scheme of the economy is a bank that controls the issue and circulation of fiat.
BTC (Bitcoin) exists as a peer-to-peer network that includes a huge amount of processing power, with a client program installed. The result is that the network is run by the users of the cryptocurrency themselves.
The total number of bitcoins is limited, the issue is 21 million coins. BTC is generated according to the code, which assumes a gradual decrease in the reward to miners for finding a block. Nav to btc exchange can be used to buy crypto.
What is a block?
BTC operates on blockchain technology. Which forms blocks of information about completed transactions. Each block stores information about all previous transactions.
The block contains its own title and has a unique solution. To generate it, miners, using computer technology, need to solve the hash and pick up a signature. The miner who succeeded receives a reward, at the moment it is equal to 12.5 BTC.
Why is the reward halving (halving)?
The idea of Satoshi Nakamoto embedded in bitcoin is to create an alternative to banking systems and fiat money. He wanted to create a self-sustaining system that would be similar to gold mining. So we have a condition that over time, mining will become more difficult, and the rewards received will slowly decrease.
Perpetually adding a constant amount of new coins is analogous to miners in a gold mine who spend resources to add gold to circulation. In our case, CPU time and electricity are wasted.
This is done to ensure that Bitcoin does not depreciate and encourages miners to support the ecosystem.
What is halving?
Halving is an artificial reduction in the amount of mined coins. The halving of the reward occurs once every four years and affects not only the earnings of miners but also the value of the coin.
Halving helps bitcoin create a deficit, the value of the coin increases: the more demand, the higher the price. Taking into account the current mining speed and all future halvings, the last BTC monat will be mined in 2140.
Dependence of the price of Bitcoin on the proximity of halving
As you can see in the graph in which statistics for 7 years are collected, the cost of the cryptocurrency and the hashrate will demonstrate growth closer to the halving date on May 25, 2020. Then the reward will decrease from 12.5 BTC to 6.25 BTC. At the moment we are in the blue zone, but as we approach the halving, we will move on to the purple one.
How to make money on halving?
Statistics for 7 years show that each halving was accompanied by a multiple increases in the rate of cryptocurrencies.
Now there is a bearish trend on the market, bitcoin went into correction, at the time of this writing, the cost of the first cryptocurrency is $ 3580. Perhaps the downtrend will continue and we will see a bottom around $ 2500.
Big changes are coming – Bakkt, Bitcoin ETF, etc., more and more countries are using blockchain technologies and legalizing cryptocurrencies. Another halving is approaching, these events will spur the rise in the price of bitcoin. Don’t be left behind and start your bitcoin investment now.