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I have only recently entered into the cryptocurrency arena. Now that I am experiencing this newish currency I am hearing a lot of about Bitcoin Halving. At first I thought it was something similar when a stock splits but apparently that is very wrong.
With everything I have read and heard I am still very confused. Can anyone provide a simple explanation of what “halving” is and what the possible outcome could be? Sherlock?
The "Bitcoin Halving" refers to the bitcoin reward that the miners get for creating a new block dropping by 50% after every 210,000 blocks that are mined.
Currently, the rewards is 12 bitcoins per block, and after the next halving it will drop to 6 BTC per block, this is due sometime in 2020.
Here is a website doing a countdown to the date : http://www.bitcoinblockhalf.com/
This is a process built-in to bitcoin with large numbers of BTC rewarded in the start and then diminishing, in order to get good amount of coins into circulation and then reduce to avoid flooding the market with inflation.
The halving seems to move in lockstep with BTC token value rises, so that the reward is sufficient to keep the miners interested in continuing to mine ... .
The final bitcoin will be mined sometime in 2140, when the "halving" will drop to zero coins reward, and at that stage the ONLY reward that bitcoin miners will get for creating a new block on the blockchain will be the fees that they collect from each transaction.
Will that be enough to keep them interested? Who can tell how big the blocks will be, and what the fees will be - but that's over a century away so it's probably not a worry for current investors.
;-)
Thanks TheGooner for your explanation … every bit helps. I obviously have a lot more reading to do to fully understand all these cryptocurrencies. In the short term I will be interested in 2020. As for 2140 I don’t think I will spend too much time worrying about. LOL
The outcome of halving is almost certainly spike of the price.
The problem is that the rise of the price can happen before halving, because people anticipate that the supply of bitcoins will be restricted, so they invest upfront. Or the rise can happen also after halving, because it takes a lot of time until the restricted supply has impact on real market.
I for example believe that current surge of btc and cryptos was also triggered by 2016 halving.
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https://www.gpwa.org/forum/images/im...07/halving.png
The principle of halving and why it affects the price towards north is that halving (that occurs always when the blue curve above is broken) halves the bitcoins that are created. The very important point here is that the created bitcoins are mined by miners. And miners are guys that simply transform costs of electricity and hardware into bitcoins. They operate in very narrow margins. It means that they have to sell almost all the bitcoins, because they use fiat (USD, CNY) to buy electricity and hardware. So you can imagine what happens if you have so-so equilibrium, where the main supply of some goods is constant, like 25 BTC per 10 mins and then this supply is cut in half.
Imagine for example what would happen with price of oil, if oil production that is like 80M barrels per day is halved to 40M. The price would go through to roof. Oil and bitcoin are different things, but the principle how the restricted supply affects the price is the same.
Here is a good Youtube presentation giving a grounding of most of the terms about Bitcoin / BlockchainQuote:
Originally Posted by Pokerface
45 minutes long - but well put together without any hype.
https://www.youtube.com/watch?v=li3rfBAP_fE