What is Bitcoin Halving and how does it affect the market?

Every 4 years, there is a phenomenon called ‘Bitcoin Halving’ which causes the prices of Bitcoin and other Crypto coins a drastic rise. Let’s take a look at what this phenomenon is like and how it affects the market.

Proof-of-work: A Return of Bitcoin Mining

Before getting to know what Bitcoin Halving is like, let’s talk about the Bitcoin system in the Blockchain network first. Bitcoin uses a system called Proof-of-Work, also known as solving mathematical equations, in exchange for rights to guarantee transactions and add new sets of information, add new blocks in the Blockchain, which is called “Mining”

The Proof-of-Work system verifies the validity of each transaction. It must be confirmed by the miner first before those transactions can be completed successfully. This is why Bitcoin is considered a currency that will never be counterfeit, cannot be duplicated, and cannot be rebuilt.

As mentioned, miners will have to confirm their blockchain transactions, of course, they’ll get something in return, which is Bitcoin. In the first phase of Bitcoin’s work around 2009, miners will receive approximately 50 Bitcoins for every block they mined. However, the current price has soared to approximately 1 million baht, making the number of Bitcoins significantly smaller, which is called halving.

What is Bitcoin Halving?

Bitcoin construction is designed to be limited to only 21 million to make coins rare and valuable. Bitcoin Halving is to reduce the number of Block Subsidy to ‘half’ every 210,000 blocks.

Each block takes an average of about 10 minutes to confirm the transaction, so it is the reason why Bitcoin Halving happens every four years.

Since Bitcoin’s inception, there have been three Bitcoin Halving occurrences in total.

The first time was in 2012 when the prize went down from 50 coins to 25 coins.
The second time was in 2016when the prize went down from 25 coins to 12.5 coins.
The Third time was in 2020 when the prize went down from 12.5 coins to 6.25 coins.
And the fourth time in 2024 when the prize went down from 6.25 coins to 3.125 coins.

It is estimated that all 21 million Bitcoins will be fully mined by 2140 or 117 years from now.

Why does Bitcoin Halving happen?

Bitcoin Halving is believed to be an anti-inflation mechanism that may be caused by a large amount of Bitcoin holdings in a short period by slowing the holding speed of mining rewards to half.

As a result, the price of Bitcoin has risen. Every time after halving, the price of Bitcoin will be able to reach a new peak in every cycle. For example, in 2012, prices rose by around 8,000 % in the 12 months after the phenomenon and rose nearly 1,000 % after Halving in 2016. The latest Halving in May 2020, bitcoin prices reached nearly $69,000 in May 2021.

For the recent Bitcoin Halving, how will this affect the price of Bitcoin? Let’s wait for the price and the heat on Halving this round.

References from

prachachat / stock2morrow / bitcointhailand / mgronline