What is bitcoin halving and what will be the block reward in 2020
Bitcoin emission is limited to 21 million coins. Accordingly, mining has a certain threshold. The issue of coins is carried out according to the plan, which involves a gradual decrease in the reward for finding the block. The compensation is halved once every four years and affects not only the earnings of miners, but also the value of digital gold.
What is a block
Bitcoin operates on blockchain technology, which involves the formation of blocks of information of committed transactions. New blocks are created by the permanent fixation of information about new transactions in the network, and contain information about all previous operations.
Each block contains an individual header and has a unique solution. To generate it, the miners, using computer technology, need to solve the hash and pick a signature. The miner, who succeeded, receives a remuneration set by the network, and all new transactions added by this block are considered confirmed. The information in the signed block cannot be changed.
The Bitcoin network is designed in such a way that on average 6 blocks are generated per hour, and every 2016 blocks, each Bitcoin client compares the speed of creating blocks with standard indicators of the required speed and sets a new network complexity.
Why does bitcoin halve
The main goal of Bitcoin is to create an alternative method of calculation to banking systems and fiat money. The main drawback of the usual method is inflation.
To prevent inflation, several regulatory factors were incorporated into the bitcoin code:
- Limited emission;
- Increase in complexity;
- Block reward halving.
Halving (halving) is part of the intra-system regulation that prevents inflation and the creation of new blocks and coins too quickly. After each halving, the miner who signed the block will receive half the reward. The reward decreases automatically after the last block is extracted from the 210 thousand limit allocated by the system.
What is the current Bitcoin block reward
Over the 8 years of the existence of the first cryptocurrency, the award has already decreased twice, and the last halving took place in 2016, which determined what block of bitcoin is now and the reward for it. Having solved the current block, the miner gets 12.5 VTS as a reward. According to experts, after halving in 2016, a small number of users stopped mining, and new ones quickly replaced them.
Bitcoin halving in history and its consequences
Since launching in 2009, the initial reward has been 50 MTC. The first halving occurred in 2012, after which the remuneration dropped to 25 MTC. There were no sharp jumps in the exchange rate, but the cost of one BTC gradually increased from $ 12 to $ 500, and at the peak of growth was $ 1200.
The next halving took place in the summer of 2016. After which, the bitcoin exchange rate also began to grow, and by January 2017 it was stable at $ 1,100, and by the beginning of 2018, bitcoin had reached a peak of $ 20,000.
Date of next block reward decrease
Every 210 thousand blocks are halved. In order to get them, it takes 4 years. According to the halving counter, it expects us on May 21, 2020, and after it the reward will be 6.25 MTC instead of the current 12.5 BTC.
Based on the statistics of previous reward reductions, we can conclude that the next halving of bitcoin will not bring sharp jumps in the rate, but there will be a tendency to a gradual increase in value. To compensate for lost remuneration, an increase in commission fees in the system may be recommended.