I got into cryptocurrency mid-2017 before Bitcoin and all other cryptocurrency ballooned to all-time highs and I thought I'd write about the Bitcoin halving of 2020 since I wasn't in the Crypto market during the 2nd having. My experience with Cryptocurrency has been a roller coaster of emotions these past few years with prices of cryptocurrency being so volatile. I think it's a pretty interesting event that occurs every 4 years with Bitcoin.
What Is Bitcoin?
To put it simply and without getting too much into complicated technicalities, Bitcoin (BTC) is a digital currency called Cryptocurrency. Bitcoin was first introduced by a person that goes by the name Satoshi Nakamoto on 31 October 2008 as a response to the Global Financial Crises of 2007-08.
Bitcoin is built on a decentralized public distributed ledger called Blockchain where all transactions between one person to another are recorded. Blockchain like the name suggests is a chain of digital blocks that uses a network of computers called Nodes around the round the world to record transactions and maintain the blockchain ledger - hence why it is called a 'Decentralized' currency. It doesn't rely on a central bank or government. Decentralization is the key to Bitcoin's success because it doesn't need a central bank to operate but instead, it uses an army of supercomputers.
Before I get into the Bitcoin Halving I need to explain what Bitcoin mining is. So Bitcoin mining is done by computers around the world and these computers all have Bitcoin's code recorded on them. The role of these computers is to solve complex equations and confirm the legitimacy for every Bitcoin transaction that takes place. Miners are then rewarded for each confirmation with newly created Bitcoins and transactions fees.
Think of it like this, gold miners have to do the dirty work and dig to obtain the gold but instead of digging Bitcoin miners only have to confirm each transaction and in return, they are rewarded with newly created Bitcoin.
As I write this, there are only 2,631,262.5 BTC remaining out of the 21,000,000 BTC to be mined, which means 18,368,737.5 have already been mined since Bitcoin was introduced.
21,000,000 Bitcoins Mined
It is estimated that the last Bitcoin to be mined will be in the year 2140. It's anyone's guess what the price of Bitcoin will be then but miners will no longer be able to claim block rewards once the last Bitcoin is mined but instead, they will be rewarded with transaction fees.
Sometimes referred to as the 'Bitcoin Halvening'. The current reward for miners for creating a block is 12.5 BTC but on 11th May 2020, the reward will be halved to 6.25 BTC. Bitcoin halving occurs when 210,000 blocks are created which takes place every 4 years. It takes approximately 10 minutes to create a block so we can estimate when the next having will take place.
The first halving took place in 2012, the second halving took place in 2016 and the next is due to take place on 11th May 2020.
After the Bitcoin halving, the rate of which Bitcoin is created will be reduced and subsequently lowers the available supply. This means that there will be a lower supply and a higher demand for Bitcoin after the event and in theory, the halving should push the price of Bitcoin up.
What Is The Purpose?
We actually don't know the exact purpose of the Bitcoin halving but many speculate that it was designed to distribute coins more quickly at the beginning of the life cycle of Bitcoin to encourage people to join the network and mine new blocks. The halving was made so that the value of each reward increased in value as the network expanded.
Bitcoin's future is definitely promising and in my personal opinion, it can only gain more traction and become more widely accepted in the future. In terms of price, history may repeat itself and we may see the price double. However, we can't say for certain what will happen with Bitcoin's price with today's economic climate and with everything being on lockdown due to Covid-19.
For any investors out there looking to invest in Bitcoin or any other Cryptocurrency, I suggest you carry out your own due diligence and only use money that you can afford to lose and prices of cryptocurrency are seen as highly volatile.
What do you think the future of Bitcoin will be?