Bitcoin's code contains a mechanism that regulates the rate at which new Bitcoins are created, thanks to which approximately every 4 years a halving takes place. Naturally, everyone is interested in how halving will affect the price of Bitcoin, mining itself, or when the next halving will take place. Read on to find out the answers to these questions.
How are Bitcoins created?
Bitcoin operates on a blockchain, an open ledger that documents all transactions. This process starts with the assembly of transactions into blocks. To add these blocks to the blockchain, miners engage in mining, a process requiring high-performance computers to solve complex mathematical puzzles. Successful mining not only adds a new block to the chain but also rewards miners with new bitcoins and transaction fees. This mining activity is fundamental to Bitcoin's network, ensuring both the creation of new bitcoins and the verification and security of all transactions.
What is Bitcoin halving?
Bitcoin halving is a fundamental event, occurring approximately every four years, which reduces the miners' block reward by half. This process was created to control Bitcoin's supply and inflation, gradually decreasing the number of new bitcoins entering circulation. In the history of Bitcoin, the mining reward has been halved several times: initially set at 50 Bitcoins per block in 2009 when the genesis block was created, it was first cut to 25 bitcoins in 2012, then to 12.5 bitcoins in 2016, and most recently to 6.25 bitcoins in 2020.
Halving's impact on mining
Bitcoin halving has a significant impact on mining economics by reducing the block reward, which can decrease mining profitability unless there's a rise in Bitcoin's value. This reduction might force miners with less advanced hardware to exit the industry, leading to a concentration of mining power in large pools, thus potentially increasing network centralization. Over time, as mining becomes more complex and costly, it risks reducing the network's decentralization, with fewer miners controlling more of the hashrate. Post the final halving, expected around the year 2140, when all bitcoins will be created, miners' income is projected to rely solely on transaction fees.
How does halving affect the price of Bitcoin?
The impact of halving on Bitcoin's price is complex and depends on the balance of supply and demand. After halving, the rate at which new bitcoins are generated could lead to an increase in price if demand remains stable or increases, due to the perception of scarcity and the attractiveness of Bitcoin as a digital store of value. This expectation of scarcity tends to drive speculative interest and investment in the run-up to the halving event, which contributes to the volatility of the Bitcoin market price. Over time, the cumulative effect of halving could potentially increase the deflationary nature of Bitcoin, and increase its long-term value in the eyes of investors.
When will the next Bitcoin halving occur?
As we have mentioned previously the next Bitcoin halving is anticipated in April 2024, as it is occurring approximately every four years or after every 210,000 blocks are mined. This event is closely watched by the cryptocurrency community, as it significantly affects the Bitcoin supply and can have significant implications for its market value. The exact timing of the halving can vary based on the speed of block generation in the Bitcoin network.
How to buy Bitcoin?
Looking to buy Bitcoin? You can buy it with P100, The Digital Money App, where it's super straightforward. It has convenient payment options, like credit cards, Apple Pay, and more, which you can use to purchase Bitcoin. And once you buy, you can easily transfer Bitcoin to your own self-custodial P100 wallet, if that's your thing.
For more information on how to buy Bitcoin with P100, head to our guide.