Next week a rather important point in the life of Bitcoin will take place in the Bitcoin Halving.
This event takes place instantly every time 210 000 blocks are mined which is roughly every four years.
In short the halving means that the reward for mining a Bitcoin block is halved.
At launch, Bitcoin miners received 50 Bitcoin for a completed block. In 2012 after the first halving that dropped to 25 Bitcoin and in 2016 that halved again to 12.5 Bitcoin.
When the halving takes place next week, the reward for mining a block will drop to 6.25 Bitcoin.
This afternoon we tuned into a Zoom call hosted by Crypto Evangelist at Luno, Jason Deane who explained what is going to happen next week when the halving takes place
When does the halving take place?
At present the halving is set to take place on 12th May 2020 at 02:10:39 UTC (04:10:39 CAT).
Why have a halving?
There is a finite amount of Bitcoin to be mined, 21 million to be exact.
As miners mine blocks for reward, that figure drops and as we’ve learned in Economics, supply impacts demand.
As the amount of Bitcoin available becomes more scarce, the value of the currency increases.
In addition to that it also controls how much coin there is available at any given time.
What happens after the halving?
Following the halving several things can happen but that doesn’t necessarily mean they will happen.
To outline this Deane separated the effects of the halving into known, likely and unknown effects.
What is known is that after the 12th May, 900 Bitcoin will be produced per day. We also know that the inflation rate of Bitcoin will drop to 1.74 percent and that miners will have to work twice as hard to produce Bitcoin.
The likely effect of the halving is that the Mining Hashrate will drop and older mining machines may not be profitable anymore. It’s also likely that the Bitcoin network won’t be affected. As for adoption and use rates, those won’t see too much change as halving’s haven’t previously affected those figures.
The unknown effects are, well, unknown. The reason for this is that there have only ever been two halvings and this third one is taking place during an interesting time in the world’s history what with the COVID-19 pandemic. There isn’t all that much data to go off of then and makes estimating what will happen tricky.
That having been said, one can look at historical data and make an educated guess. We aren’t fans of guessing when it comes to financial situations though and you should speak to somebody in the know before making any sort of investment.
The crypto evangelist does point out that there are bear and bull cases for what will happen to the market.
The bearish cases include miners selling Bitcoin to pay for upgrades and COVID-19 detracting attention away from Bitcoin.
The bullish cases however suggest that the lower supply and increased demand will shoot the price up. Bitcoin could also be seen as a safe haven for folks worried about investing given the current pandemic.
The fact of the matter is we don’t know what will happen and that makes this all the more interesting.
The last halving took place just before Bitcoin became a hot topic and the price soared. While many are hoping for a similar rally this time around, right now it’s a matter of wait-and-see.[Image – CC 0 Pixabay]