Bitcoin halving: Will this week's event spark a crypto boom?
What's the story
The cryptocurrency world is eagerly awaiting the forthcoming Bitcoin 'halving' event, predicted to take place on or before April 19.
This significant occurrence, which happens every four years, reduces the reward for creating new Bitcoin by 50%.
The impending halving will see the reward for generating new Bitcoin drop from 6.25 to 3.125.
This cycle will continue until all 21 million Bitcoins have been mined.
Purpose
Bitcoin 'halving': A mechanism to counter inflation
The 'halving' concept was incorporated into Bitcoin's code from its inception to maintain scarcity and protect against inflation.
This mechanism has been linked with significant increases in Bitcoin's value in the past.
The first halving occurred in November 2012, reducing the reward from 50 Bitcoins to 25, at a time when Bitcoin's price was $12.
The cycle will continue until all Bitcoins have been mined, ensuring a controlled supply.
Mining
The process of Bitcoin creation: Mining
Bitcoin is generated through a process known as mining, where miners use advanced computer hardware to solve complex mathematical problems and validate transactions on the blockchain network.
For their efforts, miners receive a predetermined amount of Bitcoins for each block of transactions they process.
The first Bitcoin block, also referred to as the Genesis Block, was created in 2009 by Satoshi Nakamoto, an unknown person or group who created Bitcoin.
Nakamoto was rewarded with 50 Bitcoins.
Impact
Bitcoin halving's historical impact on cryptocurrency value
Historically, Bitcoin halving has driven the cryptocurrency's price upwards.
Following the first halving in 2012, the price rose from $12 to $44 in 100 days, and then to $135 in 300 days.
Similarly, after the 2016 halving, the price increased from $658 to $1,551 within 300 days.
The most recent halving in 2020 saw the price jump from $8,601 to $50,941 within a similar timeframe.
Future
Bitcoin mining's future and environmental impact
As of March 2024, approximately 19.65 million Bitcoins were in circulation, with about 1.35 million left to be released through mining rewards.
It is projected that by 2140 all 21 million Bitcoins will be mined and the network will stop creating new bitcoins.
Once all Bitcoins have been mined, miners' revenue will come from transaction fees as block rewards decrease to zero.
Bitcoin mining has been criticized for its significant energy consumption, equivalent to Switzerland's annual energy use.