The Halving or The Halvening is something you will have at least heard about even if you are relatively new to Bitcoin or the world of Cryptocurrencies. What does it mean though and what kind of impact does it have on Bitcoin? In the following post, we are going to discuss everything you should know about The Halvening, including what it is, what it means and when it is happening next.
Before we go into all that, though, for those completely new to Bitcoin, let’s explain some of the basics regarding bitcoin.
What is Bitcoin?
Bitcoin, created in 20009, is a digital currency, most commonly known as a cryptocurrency. Satoshi Nakamoto, a pseudonymous developer, released a white paper that set out his/her/their (we are not even sure if it was one person, male, female or a group of people) ideas for Bitcoin. It would provide users with much lower fees for transactions than the more traditional online payment schemes that were in place and was not issued by governments like traditional currency.
Bitcoins, in effect, do not actually physically exist. There are balances recorded on a public-access ledger stored in the cloud, alongside all Bitcoin transactions that have taken place to date. All of these are verified using huge amounts of computing power.
What is Bitcoin Mining?
Bitcoin mining is the task of adding new transaction records onto the Blockchain, that is the public-access ledger we already discussed, based in the cloud. Mining ensures all transactions are confirmed. Specialized computers are used to mine Bitcoins and they achieve their goal by finding the solution to a computational problem that then means they can chain transaction blocks together. Which is why it is called a blockchain.
Now that you know a little more about Bitcoin and what Bitcoin mining is, it’s time to look at just why there is so much excitment about the Halvening.
What Actually is The Halvening?
The Halvening is a moment that has been predetermined to occur and results in the halving of Bitcoin’s block subsidy. This occurrence is set to happen every 210,000 blocks, which means it happens approximately every 4 years and is one of the main features of Bitcoin that makes it unique from other cryptocurrencies. It was established to make sure that there would be a capped supply eventually of 21 million Bitcoin.
The Halving is set to continue to occur at regular intervals until Bitcoin’s block subsidy has been reduced to its smallest value of 1 Satoshi or 0.00000001 BTC. With this in place it means that the following block subsidy after 1 Satoshi would be 0 and from that point onwards Bitcoin miners would only be able to collect the transaction fees.
Understanding Block Subsidy
When a Bitcoin miner completely solves a blockchain, a predetermined number of bitcoins are generated as a block reward. The amount that the block reward is worth is calculated by taking the block subsidy as it was originally, 50 BTC and adding the fees.
Each 210,00 blocks that are mined the subsidy is halved until you reach the block you started mining. Therefore, if the blocks from 1 to 210,000 had 50 BTC subsidy, the following, that is from 210,001 to 420,000 will have a 25 BTC subsidy, and the 420,001 to 630,00 will have a 12.5 BTC subsidy and on and on.
It is crucial to remember that Bitcoin earn more than just the block subsidy when they mine blocks. There are fees that users have attached to their own transactions as a way of incentivizing them that miners can collect too so that they are included in the closest block.
Have There Already Been Halvenings In the Past and When Will the Next Take Place?
So far, there have been two previous Halvings – one that took place on 28th November 2012, when the subsidy was reduced from 50 BTC to 25 BTC for each block. Then another occurred in 2016 on July 9t when the subsidy halved again from 25 BTC to 12.5 BTC for each block.
The next Halvening is due to occur very soon. Although it is just an estimation, it is expected to happen the week beginning May 18th. Then the number of blocks will reach 630,000 and this will half the subsidy again to make it 6.25 BTC.
If you are very new to Bitcoin mining or trading or have an active interest, you may wonder what kind of impact the Halvening can have and why it’s such an important event. There are a number of reasons.
It Establishes Predictable Scarcity
As we noted earlier, one of the distinctive features of Bitcoin is that it has a hard cap of 21 million BTC. Which means it benefits from true and predictable scarcity. Unless the rules are altered, 21,000,000.00000001 BTC will never exist. It’s also worth noting that due to Bitcoin’s supply formula, 21 million bitcoins will never exist either as it will work out as 20,999,999.9796. This is down to the mechanism that is in place that ensures the block subsidy halvening always takes place at the relevant time.
So, the fact that these halvings ensure Bitcoin has predictable scarcity is why they are so important and monitored closely.
The Potential Repercussions on the Price
Another reasons why the Halvings are closely monitored and waited for by miners and anyone involved or interested in Bitcoin is that the previous two were followed by an astonishing increase in the price of Bitcoin. There is a lot of debate and various theories bandied around about how the price of bitcoin can be accurately modelled. The one thing that all these theories appear to have in common, however, is that they involve the total supply available of Bitcoin.
As the supply of new bitcoin is reduced with each halvening, the price is always affected dramatically afterwards.
What will happen this time around, is anyone’s guess really until it happens. However, because without fail something has happened, the whole of the Bitcoin community, miners and traders alike will be watching, waiting and reacting accordingly.
Where Can I Buy Bitcoin?
Since we are still in the early days of the rise of Cryptocurrencies, there are not a lot of great options for those in the United States to easily purchase Bitcoin, as it must be held on an exchange or privately via a secure electronic wallet. Probably the easiest and most well-known public exchange is Coinbase, which boasts approximately 20 different coins including Bitcoin, Ethereum, Litecoin, and others. Simply deposit some cash into your account and you will be able to buy and sell various cryptocurrencies.
Another newer option is Robinhood, which offers significantly lower fees, but a more limited selection of coins.
The Effect on Alt-Coins
Traditionally as the price of Bitcoin fluctuates, the smaller alt-coins, move in concert with it. However at this point there are literally hundreds, if not thousands of coins, most with little intrinsic value. Personally, the coins I am highest on at this point, other than Bitcoin, include Chainlink, Enjin, and Ethereum. My dark horse coin, which I’m exceptionally high on is Digibyte.
Digibyte (DGB) was founded in 2014 by its lead-developer, Jared Tate, and aims to increase transaction speeds, offer true decentralization, and state of the art security. DGB technology performs significantly better than most other cryptocurrencies. It is 40x faster than Bitcoin and has been designed to have the fastest block speed on the UTXO Blockchain, which makes it exceptional.
It is up over 500% in the last few months and still can be had at under .03 cents a token. This is an undervalued asset which has truly spectacular potential. Buy some now, and thank me later.