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What will happen to Bitcoin (BTC) after halving?

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On May 12, 2020, the Bitcoin miners reward will be halved for the third time. But what will happen to Bitcoin after halving?

Starting with block 630000, it is estimated that the May 12, the miner who manages to extract a single block will be rewarded with 6.25 BTC.

Initially, this reward was 50 BTC, then it was reduced for the first time to 25 BTC on November 29, 2012 and for the second time to 12.5 BTC on July 10, 2016.

The fact is that the reward for miners is the only source of new BTC. For example, before the genesis block on January 3, 2009 there was no BTC and the first 50 BTC were created with that block as a prize for the miner who mined it (Satoshi Nakamoto).

Therefore, the current supply of BTC is modified only by this factor and by the possible loss of private keys resulting in the impossibility of moving the BTC contained in the corresponding public addresses.

The halving of the reward is also equivalent to the halving of creating a new BTC, as the rate at which blocks are mined remains fixed for around 10 minutes and this has a considerable impact on the creation of a new circulating volume.

In any case, due to the fact that sooner or later, thanks to halvings, no more new BTCs will be created, this cryptocurrency is deflationary in nature, because the number of bitcoins actually circulating at some point, in the distant future, begins to decrease.

What happened during past halvings

In short, halving is the most important event in Bitcoin's history since the genesis block, and it's also basically one of the main reasons for its success.

For example, during 2019 around 688,000 new BTCs were created, which increased bitcoin's money supply by 3.9% during the year.

In 2020, on the other hand, around 450,900 BTC are expected to be created, which will reduce the annual increase in the money supply to 2.5%.

In 2021, the BTC created will presumably drop to 328,500, down to approximately 1.8%.

This reduction in the increase in circulating mass is likely to lead to a reduction in the supply of bitcoins in the market and this could mean a price increase if demand remains constant or increases.

However, this also has a drawback.

In fact, a halving of the reward for miners also means a halving of their earnings. However, despite what one might believe, this remains an exclusive problem for the miners themselves, who will have to find ways to reduce costs, because the Bitcoin protocol is designed to work regardless of the number of miners who validate the blocks.

If, for example, halving the reward caused some miners to stop mining, this would, on the one hand, increase the percentage of BTC available to other miners who decided not to give up, while on the other hand, it would also decrease the hashrate to Bitcoin mining provision.

In this case, the protocol will automatically adjust the difficulty, so that even with less hashrate available, one block is always mined every 10 minutes.

Therefore, halving will not change the mining operation, but at most it will reduce the number of miners.

In addition to this reasoning, it must be added that miners generally cover their costs by spending fiat currency, so if the BTC they will receive as a bonus will be worth more in dollars, for example, in the end their profits could change little or even theoretically increase.

Therefore halving will not have an impact on mining, but perhaps it will have an impact on individual miners, while it will certainly reduce the increase in the money supply and therefore market supply.



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