Bitcoin Halving in 2020: What You Need to Know

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What is bitcoin halving

The third “halving” in the history of bitcoin will occur in 2020, and any investor who would like to buy this asset or has already done this in the past few weeks should understand that at the moment there is an active growth in the main cryptocurrency ($ 13,715; + 20.37%), which is likely to continue next year.

Halving bitcoin is a half-way reward for the miners of this coin, who find new blocks in the bitcoin blockchain (its network). Information on any and without (large or smallest) bitcoin transactions is recorded in blocks. Whenever a Bitcoin transaction occurs, it is recorded in the next block found by the miners, as in a journal (registry). However, a block can only be found by solving a mathematical problem with the help of a miner / many miners (miner farms) – specially configured computers. Those transactions are recorded in the blocks, the correctness of which was verified by the miners, and only after filling the block with transactions the miner receives a reward – a “newborn” coin called “bitcoin”. In fact, this is the issue (issue) of bitcoins. However, the competition among such computers and mining farms in the world is simply huge!

What is the effect of halving

Halving the reward (emission) by half (halving) affects the number of miners who receive bitcoins for mining blocks of bitcoin, which historically had a positive impact on the price of the main cryptocurrency in the long term. Bitcoin is set up so that only 21 million coins can be mined in the end. Halving is designed to prevent coin inflation. Unlike central banks, which can print cash at their discretion, the number of bitcoins is limited. Thus, cryptocurrency becomes more scarce and valuable, and even becomes more like gold than a “freely printable” national fiat currency.

Bitcoin mining is reminiscent of some final spurt when only the first person who gets to the finish line (fills the block) receives bitcoins. Previously, the reward for the block was 50 bitcoins, and these coins then cost “mere cents”. However, the two previous halving already reduced the reward twice, and now it amounts to 12.5 bitcoins per block. In 2020, the reward will drop to 6.25 bitcoins (now about $ 80,000). Halving affects miners, as some of them conclude that mining costs – electricity and computing power – are not worth the reduced reward, while others will still hold on to their mining devices, given that demand is growing As the stock of coins in the world is already approaching their final number (21 million).

Each halving is a reminder that the reserves are running out, although the last bitcoin should be born around 2140. And every halving thus limits the number of new bitcoins being created, making existing coins more valuable. All of the above is very similar to a pool in the desert, when the water will be less valuable, if you have the opportunity to replenish the pool from the tap when you want it yourself. However, everything will be different if the amount of water coming from the tap is gradually reduced, due to which the available water will become more valuable.

“As bitcoin prices rise, more miners get an incentive to fight for a reward,” says Brix Jorgensen, a software developer. “At the same time, the more miners, the higher the network security. The higher the security level, the greater the value of Bitcoin as a monetary instrument, and the demand for it is growing. ”

How does halving affect the price of bitcoin

Halving tends to increase bitcoin prices in the long run. Prior to the previous bitcoin halving, in 2016 there was a slow but steady increase in the price of bitcoin for about a year.

When will the next bitcoin halving happen

According to bitcoinblockhalf.com, the nearest bitcoin halving will occur on May 21, 2020 (after 330 days).

After two previous halvings, bitcoin rallies took place about a year later. After the first halving in 2012, Bitcoin hit a record high of $ 1,000 by November 2013. After halving also took place in 2016, bitcoin took off again and reached its record high of $ 20,089 on December 18, 2017, after which its price fell. However, since February 2019, Bitcoin began to grow slowly, as did the number of its transactions.

Bitcoin has come a long way since 2009, when Finnish developer Marty Malmi, who worked on bitcoins, sold 5050 coins for only $ 5.02 – that is, then bitcoin cost only $ 0.0009, even less than a tenth of a cent.

Finally, it should be noted that price increases can only make sense because of supply and demand. Limiting bitcoin reserves to 21 million coins makes them rarer and more valuable. Such a deficit, coupled with an increase in people’s awareness of bitcoins and cryptocurrencies in recent years, means that demand and price are likely to inevitably increase.

So, if you want to buy bitcoins, now is the time to do it, as their price will slowly rise before the 2020 halving. And please don’t waste your bitcoins on pizza.

 

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