Bitcoin block halving
With the Bitcoin block halving, the influx of newly created bitcoins is halved. A halving takes place roughly every four years. So how does that work exactly? This article involves some advanced crypto lingo, but we’re certain that when you’ve read it, you’ll have learned something new about the supply of bitcoin and its price developments!
Where do bitcoins come from?
To fully grasp the concept of the Bitcoin block halving, it’s necessary to know how new bitcoins come into circulation.
Nodes and miners are participants of the Bitcoin network. They maintain the network 24/7. Nodes validate transactions before they are added to the blockchain. Miners do the same, but additionally they bundle the transactions into blocks and add these to the existing chain. Every miner is a node, but a node is not a miner per se.
Every ten minutes (on average), a miner adds a new block of verified transactions to the blockchain. In order to do so, a miner’s computer has to solve a cryptographic puzzle, which demands great computing power. Each block in the blockchain is cryptographically linked to its previous block.
Miners run their computers 24/7, trying to solve the puzzles. You can imagine this requires quite some energy. When a miner is successful and his block is added to the chain, a reward is given in the form of newly created bitcoins.
This so-called block reward is how new bitcoins come into circulation. Often, they enter the circulating supply right away, because miners sell them in exchange for traditional currencies in order to pay their energy bills.
What is the Bitcoin block halving?
The Bitcoin block halving means that the block reward for miners is halved. This indicates that the influx of newly created bitcoins is halved as well.
As previously mentioned, the Bitcoin block halving takes place every four years or so. To be exact, the halving is scheduled after every 210,000 blocks. So when each block is mined in ten minutes on average, 210,000 blocks take about four years to mine.
When Bitcoin was created, 50 bitcoins were released every ten minutes. After the first halving back in 2012, 25 bitcoins came into circulation every ten minutes on average, and currently the set amount is 12.5 bitcoins. After the next halving in 2020, only 6.25 newly created bitcoins will enter the market with every newly mined transaction block.
A fixed amount of new bitcoins will keep being released this way, until the total amount of 21 million bitcoins are mined. This is expected to happen in the year 2140.
This whole process makes bitcoin uniquely scarce, and this scarcity makes bitcoin valuable. That has everything to do with supply and demand. Think about gold, or limited edition Pokémon cards. Is there a great demand with a limited supply? Then the price will inevitably rise.
What happens with the price after a Bitcoin block halving?
Many believe that the halving has a great effect on the bitcoin price. And that’s not a strange thought, because with each halving, new bitcoins become scarcer. Additionally, when we look at past halvings, we see that each time so far, there was quite a price increase some time afterwards.
Bitcoin block halving 2012
The first Bitcoin block halving took place on 28 November 2012. The block reward decreased from 50 bitcoins to 25 bitcoins. At that time, the bitcoin price was 11 euros. One year later? 930 euros. That’s an increase of 8,350 percent..!
Bitcoin block halving 2016
On 9 July 2016, there was the second Bitcoin block halving, adjusting the block reward to 12.5 bitcoins. In July 2016, bitcoin was worth 593 euros, and a year later it was worth 2,238 euros. That’s a 275 percent price increase! But it didn’t stop there, because by the end of 2017, bitcoin was worth an incredible 16,500 euros.
Bitcoin block halving 2020
The next Bitcoin block halving will take place around May 2020. What will happen exactly remains to be seen. We may see something similar to previous halvings, but perhaps we will see the complete opposite. The only thing you can really be sure about is that you can follow the price developments from a front row seat with the BLOX app.
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