A Breakdown of Bitcoin Halving
There are a lot of news and rumors going around that speak of the upcoming Bitcoin halving. Many investors, traders and spectators are making predictions as to how this will affect Bitcoin’s price. Many investors are bullish about the event and cite history as a good example.
In order to understand the Bitcoin halving you must understand the nature of Bitcoin. Bitcoin being a decentralized asset, has no single authority over it’s value or supply. Instead the protocol was designed to limit supply for several reasons. Part of the reason for the limited supply is due to technical limitations. Another reason is to create stability in the supply.
As part of the protocol, Bitcoins are issued when miners confirm transactions and a new block is created or mined. As a reward for using their resources to support the network, miners are given newly created bitcoins. Upon the initial launch of Bitcoin, the Bitcoin mining reward was 50BTC. However, today the reward stands at 12.6 BTC.
As you can see, the reward has decreased over time. This was built into the protocol and is agreed upon by the nodes on the network. So every time 210,000 blocks are mined, the reward will decrease by half. Thus, at the next halving, which is expected to occur in May of 2020, the reward will decrease to 6.25 BTC.
In essence, the halving reduces the upcoming supply of Bitcoins in the network. Historically, and in theory, this created scarcity should be beneficial to the value of Bitcoin. So long as usage and demand for coins remains stable, the halving event should benefit all hodlers and miners of Bitcoin.