To understand Bitcoin halving we must first know about Bitcoin and its origin as the first virtual currency.
Bitcoin, the first cryptocurrency which came into existence as the first decentralized currency that the digital world ever got. The origin of Bitcoin is associated with a financial accident that shook the financial stability of the whole world. The bankruptcy of one of the biggest financial institutions leads to the introduction of this virtual currency. The currency came into existence in the year 2009 by an unknown person who is said to have been named SATOSHI NAKAMOTO. He published the white paper concerning the formation and its introduction to the people. The key points of this currency were:
- It is a system of decentralized ownership, which means it is not controlled by any third party. The investor has full control over his currency and he can anytime without any stipulated contingency entertain his currency the way he likes.
- It is a public distribution system which means any information related to the party is available on the system be it the monetary amount, time and place of transaction.
- It is based on blockchain technology, a blockchain includes in it many blocks that store the information related to the transaction. Generally, the information is of the transaction, the hash of past data and the current data.
- This system promotes transparency, no matter to which country you belong, what time you are wanting it, you can have all the information at any time.
Bitcoin halving is a process that takes place after every four years since it has come into being. Until now three bitcoin halving has taken place; the last halving was done in the year 2020. Halving is a process that is possible only if mining is happening.
Bitcoin mining is the process of creating a new bitcoin. The process through which these coins are mined is called mining. To mine a coin it needs computers, rigs, GPUs etc. through these instruments mining is done by solving the complex equation. If a miner solves the equation within the stipulated time in the very first place, then he gets mining rewards in the form of Bitcoins. The mining reward associated with the currency is split in half and this is a process taking place after every four years. The reason behind halving the reward is to keep Bitcoins in circulation for the longest time possible. When Bitcoin was just starting as a cryptocurrency, its mining reward was 50 Bitcoins, but after the subsequent halving, the current reward as a miner you get is 6.25 Bitcoins.
- As we know, Bitcoin works on the law of demand and supply, halving the Bitcoin mitigates the rate of coins newly created, resulting in supplying fewer coins in the market.
- As per the old trends, the halving has resulted in giving a high boom to its price. The first such halving was done in 2012 and subsequently every 4th year until 2020.
- The price of bitcoin always sees a surge post its halving, many instances like Musk not allowing payments in bitcoin and China also restricting its usage has made a fall for its price but even then, it has maintained its value to an appreciable level.
- As per reports also halving the bitcoin mining rewards has always given positive results in terms of its price.
- Halving plays a significant role in popping the price of bitcoin up and many times it has proved to be beneficial in terms of price fluctuations.
I hope that the information shared above may help you all in understanding the basic factors pertaining to Bitcoin and I wish you all a favourable trading time ahead.