Bitcoin Halving Explained and Implications

What is Bitcoin Halving?

First thing first, in order to understand the term bitcoin halving, there is a need to know the basic principle of how the bitcoin network works.

Bitcoin Block Reward Halving Count down

Reward-Drop ETA date: 15 Jun 2020 00:33 UTC

965Days 12Hours 07Minutes 28Seconds

All bitcoin transactions are recorded on a distributed database called blockchain, The transactions are recorded in  blocks after blocks and therefore create the chain. All this complicated mathematical process made possible thanks to the miners which uses computational power and therefore being rewarded in bitcoin for mining. This process creates new bitcoins.

The average time of finding block by the miners is about 10 minutes and than new Bitcoins are created. At the beginning of the Bitcoin the reward for  finding a block was 50 Bitcoins.
At November 28th in 2012 the first Bitcoin block halving occurred and the number of Bitcoins per block dropped to 25 Bitcoins.
Four years later, at July 10th 2016 the second Bitcoin halving occurred and the number of Bitcoins per block dropped to 12.5 Bitcoins.
The Bitcoin block mining reward halves every 210,000 blocks, the coin reward will decrease from 12.5 Bitcoins to 6.25 Bitcoins per block finding at June 15th 2020.

What is the reason for Bitcoin Halving?

It’s all about control supply!
There are only 21 million bitcoins to ever be produced, there are rules that dictate how much bitcoin will be produced and when and that supply is reduced overtime, till there will be no new bitcoins released.
Once there have been 64 bitcoin halvings, there will not be any new bitcoin releasing to the network. In short, after 50 bitcoins reward has been divided 64 times, there will be 21 million bitcoins in the market and no more new bitcoins to be released to the market circulation.
The date for the last Bitcoin to be mined is 2140!

What Are The Implications Of Bitcoin Halving?

The first ones to be affected from Bitcoin halving are the miners.

Bitcoin miners make money when the revenue from bitcoin mining exceeds the cost of running the mining equipment and electricity, the bitcoin halving cause this revenue to fall dramatically.
Some miners even shutting down their mining operation due to losing 50% of revenue.

So,  June 15th 2020 is the end of all bitcoin miners ?

Not necessarily, The miners are the ones who keep the bitcoin transactions alive, thanks for their mining hashing power and therefore the miners are rewarded for that.
A lot of factors are involved if it will be worth keeping the mining business alive or shut it down, the future of bitcoin price is defiantly one of the most important factor for that decision. Some miner might stop their mining business due to low profitability.

 

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