Deep dive into Bitcoin halving.

What is Bitcoin halving?

Bitcoin halving is an event that occurs approx. every four years or after mining 210,000 blocks (a data structure that contains transactions and metadata about the block - read below). The number of BTC rewards per block is reduced by 50%. Next halving is anticipated to happen in April 2024 and an upcoming Bitcoin halving will lead to reduction in block rewards from 6.25 BTC to 3.125 BTC.

Exact date cannot be predicted as it depends on block height. Next halving will occur on block 840.000. Currently at the time of this post : 802.848 according to blockchain.com

Bitcoin halving is pre-programmed event that will continue to occur until the final supply of 21 million BTC is reached.

Understanding of blocks

Block is fundamental component of blockchain. It is a data structure that contains transactions and metadata about the block. When bitcoin transactions happen, they are grouped together into a block. Block includes details about transaction, such as transaction amount, addresses, etc.

Blocks are mined. Miners that participate in Bitcoin network are "competing" to solve complex mathematical puzzles some call them "hash puzzles", which validate and confirm transactions on the network. The first one to solve it, adds new block of transactions to the blockchain (once added to blockchain they are permanent). As reward they receive certain number of Bitcoin (now 6.25 BTC) and transaction fees from this particular block.

fact; one block contains 1 megabyte of transaction records ( some are larger in size recently)

Yes miners are affected by halving. As mining rewards are lowered by 50%, they are rewarded less to face same if not more competition. Some say Bitcoin's price will have to reach 50k to have same profit margins as before halving.

Network security outlook

Bitcoin halving also has impact on security. As block rewards decrease by 50%, miners income decreases with it. If transaction fees do not increase and make up for loss the security of network could possibly decrease.

So how could this be prevented?

As supply decreases, price of Bitcoin potentially rises up, which would maintain or increase miners income. Secondly, as Bitcoin is getting more recognized number of transactions increases, meaning miners get more transaction fees into their pocket and overtime fees could become important part of security budget.

Bitcoin halving is essential for Bitcoin network

Bitcoin halving is crucial, it affects rate at which new coins are released into circulation. With each halving less Bitcoin will be produced annually, potentially making it more difficult to acquire. Meaning there will be lower supply and if demand increases price most likely rises.

Previous three Bitcoin halvings

To this day we've had 3 reward halvings. First one took place in 2012, day of the halving BTC was priced at $12.35 one year later Bitcoin almost hit $1000. Second halving, July 2016 Bitcoin was priced $650.53 on day of halving, but rose to 2,550 by July next year. Most recent halving in May 2020 Bitcoin's price on halving day was $8821.42, later rising to all-time high in November 21'.

source: coindesk

Bitcoin halving symbolizes deflationary aspect. Since it's decentralized cryptocurrency government and banks cannot print more and total supply of Bitcoin is fixed.

Does halving have an impact on Bitcoin's price?

Like we have seen, Bitcoin price rises have been often linked to Bitcoins halving events. Significant upward momentum before and after halvings, but it's really important to remember that just because something performed in the past it does not necessarily mean future results. The price of Bitcoin can be influenced by many things, not only halving events.

I strongly hope price impact will be positive like previous years, we have all been waiting for quite sometime now.

That being said this is everything you need to know about halving.

Feel free to ask any questions or correct me.