What is the Bitcoin halving?

Bitcoin
Bitcoin

One of the main features of Bitcoin is that it is limited in number. There are only 21 million Bitcoin. Once the network meets these limits, no more Bitcoin can be issued.

However, if these 21 million Bitcoins were issued in the wrong way, this could cause huge problems. Bitcoin is created when the blockchain rewards when miners validate transactions. The network provides Bitcoin to miners who add blocks to their network.

To ensure the continuity of this process, the creator of Bitcoin, Satoshi Nakamoto, put a rule in the Bitcoin protocol that rewards for miners will be reduced by 50%! T (MISSING) every 210,000 blocks, or roughly every 4 years.

This event is known as a ‘Bitcoin halving’ or ‘Halvening’.

Since the inception of Bitcoin in 2009, there have been two halving events. The first reward for miners is 50 Bitcoin for each block mined. This amount was then reduced to 25 Bitcoin in 2012, 12.5 Bitcoin in 2016 (current reward), and at the next halving which is expected to occur in May 2020, the reward will decrease to 6.25 Bitcoin.

Why does this happen?

Halving is done to control bidding. Regarding demand, if coins circulate too fast, according to basic economic theory, there will be a circulating surplus and will cause the coin value to fall.

Satoshi Nakamoto explained this frame of mind in an email:

“The fact that there are new coins being issued means that the amount of money supply has increased compared to what was planned, but this does not necessarily lead to inflation. If the supply of money increases at the same rate as the number of users of money, then the price will remain stable. If the quantity of supply does not increase as demand increases, deflation will occur and early money adopters will enjoy an increase in value. “

“Coins have to be distributed initially, and a constant speed seems like the best formula.”

To determine the speed at which the coins were issued, Satoshi used a logarithmic scale. Therefore, after 10 years, 80%! D (MISSING) of the Bitcoin offering will have already been mined. However, the last Bitcoin will only be issued in 2140.