Every four years, the reward of Bitcoin mining is cut into half. Bitcoin uses an algorithm that allows for a limited supply in the number of Bitcoin in market circulation. In 2009, the halving reward was 50 BTCs. This was when Satoshi had just launched Bitcoin. 4 years later, in 2012 Bitcoin halved and the reward dropped to 25 BTCs. In 2016, the reward dropped to 12.5 BTCs. Beginning 2020, when I first got into crypto, Bitcoin halved again to 6.25 BTCs as a reward for its miners. Can you guess the next Bitcoin halving and the next reward? Yeah it will be close to the number of pie.
2009 - 2012 -> 50
2012 - 2016 -> 25
2016 - 2020 ->12.5
2020 - 2024 -> 6.25
2024 - 2028 -> Can you guess the Reward?
Reasons for Bitcoin Halving
Inflation. Inflation is the key reason for Bitcoin halving. Satoshi ( as rumoured be a group of the five engineers of crypto currencies existing before Bitcoin inclusive of Elon Musk), observed how excessive printing of money causes inflation.
To avoid this, Satoshi Nakamoto introduced the halving mechanism; one thing that differentiates it from other cryptocurrencies including Ethereum. Other cryptocurrencies have a burn wallet to limit circulation of coins. However, with Bitcoin, halving controls this. Ethereum is even moving to Proof of Stake later on in September 2022, merging with Beacon Chain ($BECN).
Following the law of supply and demand, less circulation of Bitcoin will mean an increase in its value. Bitcoin will become a rare commodity like Gold, only accessible by few individuals. Therefore, Bitcoin is actually deflationary in the long term. Reasons for this include,
A limited supply because only 21 million Bitcoins can be in circulation.
People sending Bitcoin to wrong addresses.
People forgetting key passwords to Bitcoin Wallets.
Therefore, an increasing demand in Bitcoin in a limited supply market will cause its price to shoot. Bitcoin is a rare commodity. Hold now while you still got the chance.
Early Bitcoin Halving Rumours
It is important to note that Bitcoin does not use real world time to determine halving, it instead uses block numbers. This is reason as to why you might hear of early Bitcoin halving rumours. Therefore, if new miners join the Blockchain and increasing mining to every 5minutes instead of 10, Bitcoin halving will occur quickly. No. Bitcoin does not function that way. Instead, the halving is constant. An increase in number of miners makes Bitcoin make the problem the miners are solving more difficult. Therefore, mining will still remain at 10 minutes and some miners might drop out.
What to do as a Miner/Investor during Bitcoin Halving?
Nothing! Yeah do nothing but stake more Bitcoin. There is nothing anyone can do to control Bitcoin halving. As an investor, you can use it to speculate Bitcoin's price. As a Miner, check if mining is still profitable.
What happens when Bitcoin halves to zero?
The cryptocurrency markets will crash. Okay. That's a joke. When Bitcoin halves to zero, the cryptocurrency markets will flourish. The rarity of gold made other precious metals valuable. Altcoins will become more valuable and there will be an increase in crypto Adoption globally. Yes! Even China will adopt cryptocurrency.
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