The third “halving” in the history of Bitcoin will take place in 2020, and any investor who would like to buy this asset or has already done so in the last few weeks should understand that the main cryptocurrency ($13,715; +20.37%) is currently growing rapidly and is likely to continue next year.
What is Bitcoin halving for begginers?
Bitcoin halving is a halving of the reward for Bitcoin miners who find new blocks of Bitcoin (its network) in blockchain. Blocks record information about any (large or small) Bitcoin transactions without exception.
Whenever a bitcoin transaction occurs, it is recorded in the next block found by the miners, as in the journal (registry).
However, the block can only be found by solving a mathematical problem with the help of a miner/multiple miner (a farm of miners) – specially configured computers. Blocks contain the transactions that have been verified by the miners, and only after the block has been filled in with transactions does the miner receive a reward – a “newborn” coin called a “bitcoin”. Basically, it is the issue of bitcoins. However, the competition among such computers and miner farms in the world is just huge!
What is the effect of bitcoin halving?
The halving of remuneration (issue) in half (halving) affects the number of miners who receive Bitcoin for mining Bitcoin blocks, which has historically had a positive effect on the price of the main cryptocurrency in the long run. Bitcoin is set to produce only 21 million coins. Halving is intended to prevent inflation of the coin. Unlike central banks, which can print cash at their own discretion, the number of bitcoins is limited. Thus, the cryptocurrency becomes more scarce and valuable, and even more like gold than the “freely printed” national fiat currency.
Bitcoin mining resembles a final breakthrough when only the first person to finish (fill the block) gets the bitcoins. Previously, the reward for the block was 50 bitcoins, and these coins were then worth “real cents”.
However, the two previous halvings have already reduced the reward twice, and now it is 12.5 bitcoins per block. In 2020, the reward will be reduced to 6.25 Bitcoins (now about $80,000). Halving affects miners, as some of them conclude that the cost of mining – electricity and computing power – is not worth the reduced reward, while others will still hold on to their mining devices, given that demand is growing as the world’s supply of coins is approaching their final number (21 million).
Each halving is a reminder that stocks are running out, although the last bitcoin should be born around 2140. And each halving thus limits the number of new Bitcoins created, making the existing coins more valuable. All of the above is very similar to a desert pool when the water is less valuable if you have the option of refilling the tap pool when you want to do so yourself. However, everything will be different if the amount of water coming from the faucet gradually decreases, making the available water more valuable.
“As the price of Bitcoin rises, more miners are motivated to fight for reward,” says Brix Jorgensen, a software developer.
However, the more miners, the more secure the network. The higher the level of security, the greater the value of Bitcoin as a monetary tool and the greater the demand for it.
How does halving affect the price of Bitcoin?
Halving usually increases the price of Bitcoin in the long run. Before 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 halving of Bitcoin happen?
According to bitcoinblockhalf.com, the nearest halving of Bitcoin will take place on May 21, 2020 (in 330 days).
After the two previous halvings, the Bitcoin rally took place about a year later. After the first halving in 2012, Bitcoin reached a record high of $1,000 by November 2013. After halving also occurred in 2016, Bitcoin took off again to reach its record high of $20,089 on 18 December 2017, followed by a decline in its price. However, since February 2019, Bitcoin has been growing slowly, as has the number of transactions.
Bitcoin has come a long way since 2009, when Finnish Bitcoin developer Marty Malmy, who worked on Bitcoins, sold 5050 coins for just $5.02 – so Bitcoin was only worth $0.0009, even less than a tenth of a cent.
Finally, it should be noted that an increase in price can only make sense because of the supply and demand. Limiting bitcoin stocks to 21 million coins makes them rarer and more valuable. This deficit, combined with increased awareness of Bitcoins and cryptocurrencies in recent years, means that demand and price are likely to inevitably rise.
So if you want to buy bitcoins, now is the time to do so, as their price will slowly rise before halving in 2020.
And please don’t waste your bitcoins on pizza in 2020!