The third Bitcoin Halving event happened on May 11, 2020 when the penultimate block number 629,999 was mined by F2Pool. To understand Bitcoin halving better, let’s first expound on how Bitcoin functions.
What is Bitcoin halving?
Bitcoin Halving meaning is basically the reduction of a miner’s reward by half (literally, halving), maintaining the scarce supply of Bitcoins. Bitcoin’s supply is limited to 21 million coins mined. Once we get to this number, the network will cease creating further Bitcoins. Just like gold, one day all the Bitcoins will be extracted and that is why it is referred to as the ‘digital gold.’
Bitcoin halving, or ‘halvening’ takes place after approximately every four years, or after every 210,000 BTC blocks are mined. After every Bitcoin Halving event, the mining difficulty rises reducing the rewards paid to miners by 50 percent. Halving has taken place three times since the coin’s invention back in 2009. We are yet to see the impact of the latest halving but the hope is that halving impacts the price of BTC in a positive way.
The initial BTC block reward from halving came about back in November 2012. The occasion saw Bitcoin Price surge from just $11 to a hefty $1,000 back then. However, this growth was delayed until at least one year since the halving. The second halving event passed again in July 2016 with Bitcoin’s price at $700. However, a year later the price catapulted to a record price of $20,000.
Bitcoin Halving events have always been followed by massive bull runs that have always seen a meteoric rise in Bitcoin’s price. In particular, a year later after the July 2016 halving, the value of the popular cryptocurrency surged to an all-time high monetary value of $20,000 in 2017. The reason behind this is simply the interplay between supply and demand; curbing the inflation rate by reducing the production of new Bitcoins by halving.
The more the computers or nodes connected to the Bitcoin network, the more stability and power of the blockchain. Currently, there are more than
When was the last Bitcoin Halving?
The last Bitcoin halving took place on May 11, 2020 at approximately 4 pm est, when the closing block number 629,999 was verified by F2Pool.
With the recent downturn in the global economy resulting from the Coronavirus pandemic, BTC seems to have caught the attention of most people after it underwent halving that occurred on May 11. After the halving event, the crypto has seen its value move as high as $10,000 only to retract back to stay at close to $9,000. This movement has made the co-founder of Reddit, Alexis Ohanian, to deduce that these movements signify that the crypto spring is imminent post-halving.
The last Bitcoin is projected to spring into being sometime around 2140 – that is, if the currency still exists and people still care enough to mine it. After that, miners’ sole compensation will be Bitcoin transaction fees.
#bitcoin could hit $115,212 in Aug 2021 based on the change in the stock-to-flow ratio across each halving.
— Dan Morehead (@dan_pantera) May 5, 2020
How many Bitcoins will ever be created?
As mentioned earlier, halving reduces the limited supply rate of the new BTC by 50 percent. Currently, the number of Bitcoins in circulation is estimated to be 18,383,412, according to Coinmarketcap. The total amount of Bitcoins that will ever exist is 21 million, meaning that we only have 2,616,588 Bitcoins left unleashed through bitcoin block reward. So, the halving of rewards automatically means there is a shortage of bitcoins.
Although the exact date is not yet clear, the next BTC halving event is set to happen in 2024, given the event occurs every four years. The last BTC is expected to be mined in 2041 when the supply of new Bitcoins will run dry. With the halving is over, rewards for bitcoins mined are now half of yesterday for BTC. There was disappointment observed after the halving.
Is Bitcoin halving good?
Bitcoin halving is very important since it means another crucial moment in the declining supply of the crypto asset. The active supply of new BTC, plus the demand and escalating supply every four years created a foreseeable economic structure with a self-controlling inflation rate.
Over the years, halving has successfully proved on two occasions that it can push the value of the cryptocurrency up. Although the halving event has occurred three times so far, it’s too early to judge this year’s halving since on the previous two occasions prior to this, it took the cryptocurrency almost one year to adjust to the impact of halving Bitcoin block reward.
What will happen after Bitcoin halving?
The only major effect of halving is the long-term increase in the cost of bitcoin as a result of the reduction in the production of new bitcoin. The average cost to mine 1 Bitcoin is now $12,525. It is not profitable to mine new bitcoins below this price point which has surely forced some miners to close shop.
Since the sell-off that happened on March 12, which saw BTC price take a downward turn to half its value, the leading digital asset has been able to make as much as a 90 percent return in the price aspect. The expected prove surge after the halving has not been seen with BTC seemingly unable to break the $10,000 resistance that was set for it.
Alongside events like the halving, we have seen crypto projects undergo some integration into key projects, in which case is the Facebook backed Libra coin. However, major crypto exchanges and firms will be looking to emulate the Facebook project while making their mark in the crypto world in the coming years. some of the notable changes after halving include:
Bitcoin miners are solely responsible for the production of new bitcoins. The initial start point while examining the impacts of block reward halving is the stability of the mining system. As already mentioned earlier, Bitcoin miners are the backbone of the entire Bitcoin Network. Alongside with mining new blocks and verifying transactions, the miners are responsible for overall network bitcoin hashrate.
Hashrate refers to the computational ability of a network. The higher the bitcoin hashrate, the more the speed and secure the network is. Halving reduces miners’ reward by half per block mined. Bearing in mind that bitcoin miners depend on bitcoin block rewards as their main source of income, how should they deal with the halving of their reward? Do they just abandon the network to trim their losses or do they just sacrifice their resources for the good of the entire ecosystem?
If miners decide to abandon the network, then one of the following things may occur:
- The bitcoin mempool might get clogged as no one is confirming transactions. The bitcoin mempool refers to where transactions sit while waiting to be verified by miners.
- A robust cartel might take over the network through a 51 percent attack.
So, how do validators ensure profitability post-halving ?
- Replace their mining hardware with more energy-efficient hardware.
- Shifting their mining operations to colder places with cheap electricity.
- Also, miners can opt for alternative electric sources to power their operations.
As mentioned earlier, the major effect of halving is the long-term increase in the value of the crypto. Does the price of BTC rise after halving? After the first BTC block halving back in 2012, the value of the crypto briefly increased from $11 to $12. However, one year later the price of bitcoin skyrocketed to reach $1,038. That translates into a 9,336.36 percent value increase.
210,000 blocks later, or four years later BTC underwent another increase in value. The value of bitcoin increased from $576 to $650 as more buyers started holding BTC in anticipation of the halving. A year later in June 2017, the price of BTC rallied to its all-time high record of $2,526. This is a 288.60 percent value increase.
Although there was an increase in valuation after the 2016 halving, it was not as significant as the 2012 halving. Experts argue that this happened because the entire bitcoin community was eagerly expecting the event, so any increase in valuation was already factored in. Nevertheless, it will not be surprising if the value of Bitcoin rises come May 2021, a year after May 2020 halving.