One of the most anticipated events in the crypto world is expected to occur in 2024: the Bitcoin Halving. Although some voices already place it in December 2023. From Cointelegraph in Spanish we have previously explained what you should know about Halving, but it never hurts to refresh your memory.
Next we will talk about some of those important topics that had already been covered by Cointelegraph in Spanish.
What is the Bitcoin halving?
A “block” is a file containing 1 MB of Bitcoin (BTC) transaction records on the Bitcoin blockchain. The “miners” compete to add the next block by solving a complex mathematical problem using specialized hardware, producing a random 64-character result known as a “hash”, ending the process and locking the block so it cannot be modified. By completing these blocks, miners receive Bitcoin.
So how does the Bitcoin halving cycle work? Miners were paid 50 BTC per block when the cryptocurrency was initially established. Early adopters may have been tempted to mine the network in this way, even before its success was apparent. The rate of new Bitcoin creation halves every 210,000 blocks mined, or roughly every four years until all 21 million Bitcoins have been mined.
According to the history of Bitcoin halving dates, the last three halvings took place in 2012, 2016 and 2020. The first Bitcoin halving or Bitcoin split occurred in 2012 when the reward for mining a block was reduced from 50 to 25 BTC. .
The halving event in 2016 reduced the incentives to 12.5 BTC for each block mined, and as of May 11, 2020, each new block mined only generates 6.25 new BTC. In 2024 (or perhaps sooner, such as December 2023), the next Bitcoin halving is expected to take place. This system will continue until about the year 2140.
Why is the Bitcoin halving happening?
The Bitcoin mining algorithm is programmed to search for new blocks every ten minutes. The time it takes to find blocks will decrease as more miners join the network and add more hashing power. To reset a 10-minute goal, the mining difficulty resets once every two weeks or so. The average time to locate a block has been consistently below 10 minutes (approximately 9.5 minutes) as the Bitcoin network has grown dramatically over the past decade.
Bitcoin supply is limited to 21 million units. The generation of new BTC will stop when the total number reaches 21 million. The Bitcoin halving ensures that the amount of Bitcoin that can be mined in each block decreases over time, making BTC more rare and valuable.
Logically, the incentive to mine Bitcoin would decrease as each halving was completed. Bitcoin halvings, on the other hand, are tied to massive increases in the price of BTC, giving miners an incentive to mine more even though their payouts have been cut in half.
Bitcoin miners are encouraged to keep mining when prices go up. On the other hand, miners may lose the incentive to create more Bitcoin if the price of the digital currency does not rise and block rewards are reduced. This is because Bitcoin mining is an expensive and time-consuming operation that needs a lot of computing power and electricity.
Why is the Bitcoin halving important?
The Bitcoin halving is usually accompanied by a lot of turmoil for the cryptocurrency. As a result of the Bitcoin halving cycle, the available Bitcoin supply decreases, increasing the value of Bitcoins that have not yet been mined. And with these changes comes the opportunity to make a profit.
On November 28, 2012, when the price of BTC was around 12 dollars, the first halving occurred; a year later, Bitcoin had risen to almost $1,000. The second halving occurred on July 9, 2016, and the price of Bitcoin crashed to $670 at the time, but rose to $2,550 in July 2017. Bitcoin reached an all-time high of around $19,700 in December of that year. . Bitcoin’s price was $8,787 at the time of the most recent halving, in May 2020, and skyrocketed in the months that followed.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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