6 min reading
It's the right time to learn more about halving and its main purpose.
What is Bitcoin halving?
Halving is a bisecting of the remuneration paid to miners for adding a new block to the Blockchain. At the moment, each new block brought 12,5 Bitcoins to the miner. Each new block is lined up in a chain with the previous blocks. Hence a distributed ledger is called Blockchain. Each block contains information about all transactions that were processed in a 10-minute period of time, including the hash of transactions, amounts, and addresses of wallets from which and where Bitcoins were transferred.
Halving or halvening? How is it correct?
Both terms refer to the same process. The original name is halving, but sometimes the word “halvening” (as an alias) is used instead. It was created as a result of the words “to halve” and “to happen”.
The main purpose of halving
The main task of halving is to control cryptocurrency, prevent inflation, stimulate the growth of the Bitcoin exchange rate and provide time for development. In 2012, the first halving was held. The creator of Ethereum Vitalik Buterin explained why it is necessary and compared Bitcoin with gold: “The world’s gold reserves are limited, and with every produced gram, it becomes more and more difficult to get the remaining gold.
Because of this limited supply, gold has maintained the international medium value of exchange and saving for more than six thousand years, and it is hoped that bitcoin will do the same.”
Advantages and disadvantages of halving
It is believed that halving has a few positive effects on the network. This process extends the reward system life. It also creates a shortage, which increases the cost of coins, and we perfectly know that the less BTC is produced for a certain period of time, the more expensive they are. It is worth noting that halving increases revenue twice for the production of each Bitcoin. The more complex the network is, the lower the reward and the more expensive the mining becomes. However, there are some disadvantages of halving. The most significant of them is when a lot of miners lose interest in the currency, considering it unprofitable. Today, we can observe a trend that only large organizations can make a profit from mining. Despite the facts, halving has already occurred twice in bitcoin history. Fortunately, it did not bring any bad consequences.
However, halving is considered to be one of the key innovative ideas that allowed Bitcoin to reach its current level of development. It clearly demonstrated the absence of the need for a centralized authority to control the issue and distribution of money. Halving prevents inflation and supports cryptocurrency functioning for a long time. At the same time, it is considered one of the most important factors that determines the growth of the BTC price in the market. Besides, halving is stressful for miners, as new investments in equipment are needed with the development of the cryptocurrency.