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If you are mesmerized by the recent talks of Bitcoin Halving 2020 and looking forward to learning more about it than you are at the right place. Here in this article, we are going to tell you everything about what is Bitcoin halving and the Bitcoin halving that happened recently on May 11th. If you are new to cryptocurrency, you might not know about Bitcoin halving but have heard about it a million times around. Anyways you must have figured out already that it refers to something essential and yes it is one of the most important events concerning bitcoin miners.
Let’s start with introducing what is bitcoin Halving.
What Is Bitcoin Halving 2020?
When the number of bitcoins circulating every 10 minutes decreases by half, it is known as The Halving. Bitcoin halving occurs every four years, the previous date was 9 July 2016. In simple words, according to halving, the reward for creating or mining new Bitcoins is cut by half and it happens after every 210,000 blocks. Initially, when Bitcoin was created, the reward amount for mining new Bitcoins was 50 BTC, which was then cut down to half after four years to 25 BTCs and then to 12.5 BTCs. Now in May 2020, the third halving occurred and the rewards were again halved to 6.25 from 12.5.
Understanding How Halving Works For Bitcoin
To understand this let’s understand how Bitcoins are mined first. It’s not easy to mine Bitcoin and it requires time, resources as well as enough technical knowledge to solve puzzling equations. Bitcoin is based on proof of work mechanism which is one of the most time and capital expensive protocols. To participate in the process of mining, one needs highly expensive machines and computers. The better and the faster your computer will be, the more will be the chances of earning Bitcoins. Miners are rewarded for solving mathematical equations eventually verifying the transactions. Once, the block is filled with the verified transactions, miners are rewarded for their work with Bitcoins.
The rewarding system remains the same until a total 210,000 blocks are completed and then after that as we said above the rewards are cut into half. This also means that after every four years, the Bitcoins released into the circulation is reduced by half. The process will continue until all the Bitcoins are released into the circulation which will be by 2140. After that, miners would be rewarded only with the transaction fees paid by users and the network will still keep on going. At present, there are 18,381,843 BTCs in circulation which means that only 2,618,157 more are left to be mined in upcoming years.
There have been two halvings in the past, once in 2012, then in 2016 and after both these halvings, the prices of Bitcoin soared high. In Nov 2012, after the first halving, the Bitcoin price rose to $1,150 from $11 and then in Dec 2017, Bitcoin’s price rose to the all-time high at $20,000 from $650.
Halving’s Effect On Bitcoin Price
We’ve already discussed what happened in the last two halvings and it is believed that the trend would continue. However, nobody can tell for sure if this time also the price is going to increase only. We saw the first demonstration of how people would react to Bitcoin halving in 2012 when the prices started to rise after some time. Then on the second halving initially, we saw little drops in the prices of Bitcoin but it gradually increased over the course of the year.
So, the theory of Bitcoin halving is that when the Bitcoins supply declines but the demand stays the same, it pushes its price up. Now, if this theory has some truth, we would see an increase in the prices of Bitcoin this year as the halving has started showing its effects on the prices of Bitcoin already.
Although, as of now not most people aren’t aware of Bitcoin halving 2020 and its effects, it is likely if enough people know about it in advance, the prices would instead increase before halving.
Halving 2020 Initial Effect on Bitcoin’s Mining Difficulty
The reduction of mining reward after the third Bitcoin halving in 2020 pushed back many miners from participating in the process. Eventually, to curb this issue, Bitcoin adjusted the difficulty level of mining by 6% to bring more miners in the process. Bitcoin’s mining difficulty determines how difficult it is to earn block reward i.e. to verify transactions. It was the first adjustment in the difficulty level of Bitcoin mining after the Bitcoin halving 2020 event.
Moreover, this difficulty level is adjusted every 14 days, accurately after 2,016 blocks so that the block interval continues to be around 10 minutes. If this time is somehow increased, maybe because of the less participation of miners in the process, Bitcoin’s network decreases its difficulty to promote more participation.
This is what happened after Bitcoin’s third halving after the completion of the 2,016 blocks.
It’s been a few days since the third Bitcoin halving took place and we’ve started to see its effect on the market already. As said above, the Bitcoin network adjusted the difficulty of mining to encourage miners for participation in the process. At present, it’s hard to tell if the prices would rise again or if we’ll see a new pattern or a new change. As the world is suffering from a new pandemic which has affected the world’s economy in a great way, there’s a lot of uncertainty for what will happen to Bitcoin. What will be the impact of Covid-19 on Bitcoin halving 2020? How will the effect of halving turn out this year amid the corona outbreak? For now, nobody has a certain answer to this question and only time will show how things will turn out after the third Bitcoin’s halving.