Bitcoin Halving Explained

If you are not clear on the concept of Bitcoin and cryptocurrencies, then the words Bitcoin halving will sound like a technical jargon. Firstly, let’s get clear on what Bitcoin is.
In simple terms, Bitcoin is a digital currency that was created back in 2009 on the back of a digital ledger system known as the Blockchain. Bitcoin, as well as the digital currencies, was designed out of a need to decentralise the financial order. The creator, Satoshi Nakamoto, sought to satisfy the needs of all those who were aggrieved by the system. Cryptocurrencies like Bitcoin seek to democratise the financial order and free people from central governing bodies and their restrictions.
With that well understood, let’s discuss Bitcoin halving. Like mentioned earlier, the cryptocurrency runs on the back of Blockchain technology. The Blockchain consists of many blocks that come together to secure the network. These blocks are added to the system by Bitcoin miners who in turn get rewarded for it. Bitcoin halving refers to the cutting in half of the rewards given to Bitcoin miners who add a block.
How it works
Satoshi Nakamoto set two essential rules for the Bitcoin protocol. The first rule is that the Bitcoin numbers would be limited to 21 million. This finite nature is unlike fiat currency where we have seen governments scramble to print more money, hence reducing its value.
The second rule is that the reward for the number of Bitcoins generated by block decreases by half every 210,000 blocks. Miners typically produce about six blocks every hour, which means it takes around four years to create 210,000 blocks.
The need for Bitcoin halving
The questions going through your mind right now are probably; why half the rewards? Aren’t the miners being shortchanged by this system?
It may seem unfair, but it is quite necessary. The laws of supply and demand come into place in digital currency just like they do in the traditional financial order. If you keep the reward the same, it will incentive miners to produce more quickly. The market will end up being flooded by Bitcoins which will reduce their value to almost zero.
The halving is, therefore, an anti-inflationary tactic. The value of Bitcoin tanking will beat the purpose of its development. The digital currency will not gain the traction and adoption it desires. People will also not see it as a potential hedge for their capital and a viable store of value. Industry experts expect the next Bitcoin halving to take place around June this year. Websites like BitcoinClock also show you the countdown until the next halving. However, we can’t say with certainty what the halving process will do to the price of Bitcoin.

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