Bitcoin is the leader in the cryptocurrency world and there is no doubt about it. Thus, it makes sense that it needs a strict regulation process. Although there is no central governance, the blockchain is designed to regulate processes amazingly.
If you are a Bitcoin investor, you probably wonder why the inflation and value of Bitcoin are kept regulated, how they keep the supply of Bitcoin fixed, or how they keep the value of the coin growing. One of the strategies is a process called Bitcoin halving. This means cutting the rewards given to miners in half, which happens every four years. To understand it better, let us dive into more detail.
What is Bitcoin Mining?
Before we understand what Bitcoin halving is all about, it is prudent that we go look at Bitcoin mining for a moment. Mining is compared to how people get precious metals. Bitcoin mining is a process where people use their supercomputers to validate transactions and other processes on the Bitcoin blockchain.
Through a process called proof of work (PoW), the miners get their rewards. These new coins find their way into the circulation of the coin. So, how is mining connected within halving? Let’s see this below.
What is Bitcoin Halving?
As mentioned, Bitcoin halving rewards are given to miners. This happens after four years when approximately 210,000 blocks have been mined. The first halving occurred in 2012, which positively impacted the value of Bitcoin. The second and third Bitcoin halving occurred in 2016 and 2020 with the next one expected in 2024.
Although the founders of the coin are barely known, they have confirmed that after mining up to 21 million Bitcoins, which is around 2040, the miners will no longer earn anything for the work. As such, transaction fees will increase so that miners can earn from that.
Does this sound interesting to you? There is a lot of information shared by experts. You can discover more by visiting a reliable website, especially if you want to become a Bitcoin miner or investor.
Benefits of Bitcoin Halving
It is believed that Bitcoin halving is not an afterthought strategy. It was in the initial design of Bitcoin operations for a reason.
The main benefit is to limit the number of Bitcoins entering the market. This promotes the growth of value because the demand increases. It’s no wonder why Bitcoin has been growing in value tremendously.
Another benefit is that it keeps the maximum number of Bitcoins to be created regulated. As mentioned, the final number of coins will be 21 million, which will be achieved by 2040. Bitcoin halving is a crucial part of this strategy, which is why the next one must occur two years from now.
Bitcoin halving may look like an unfair deal for miners, but they enjoy a growing value, especially if they hold their earnings and wait for the value to increase before they sell. It has to happen for the good of the entire ecosystem.