Today, I’m going to discuss how Bitcoin halving works, like its basics and stuff. But if you’re interested in delving to the process deeper, I suggest you enroll in online courses that are intended for Bitcoin discussion. I don’t think that there’s another course better than The Better Traders‘, which are all intentionally designed for cryptocurrency traders, miners, and the like.
So what’s exactly is Bitcoin halving? How did it evolve? And what are its impacts on miners? I’ll answer all of these questions in this post.
Let’s start! Are you ready?
Why Does Bitcoin Halving Happen?
It’s no surprise that Bitcoin is notoriously unpredictable; it’s susceptible to sudden price changes, where swift reversals can affect your cryptocurrency value in just a blink of an eye. And since the digital currency lacks ties with our real world’s economy, market observers find it hard to accommodate the unforeseen ups and downs of the price value.
By next week, Bitcoin is about to enter its third halving process. This is one of the most critical and crucial events for miners, as the process involves power and balance within the network. Bitcoin halving refers to a Bitcoin’s episode where its price rises in the long-term.
So what’s Bitcoin halving? Let’s take a look at this example:
We all know that miners and traders use powerful software and specialized computers to solve complicated math problems in the Bitcoin blockchain. And every time a miner solves the math problem, Bitcoin creates a new “block,” where miners of the network verify. The block includes the latest batch of transactions on the network, which replaces the solved math problem into a more difficult one for miners to solve. You see, this is a constant process, as miners find solving math problems rewarding and fulfilling at the same time.
Why did I say it’s rewarding? This is because you earn a reward by solving complicated math problems, and Bitcoin is an example. Spending lots of processes, efforts, and time in deciphering the problem and finding the block allows you to receive around 12.5 BTC, which amounts to $123,300 as of this writing.
Since more miners are getting acquainted with finding and solving a new block in Bitcoin’s blockchain, it gets more difficult to earn the network’s rewards. Good thing, Satoshi Nakamoto (the anonymous creator of Bitcoin) already realized that this would be an issue in the future. Therefore, he created more secure and complicated blocks so that miners cannot reap Bitcoin rewards quickly. Nakamoto understood this event and placed even more sophisticated math problems every single time a new block is created.
And this is where Bitcoin halving takes place. For every 210,000 blocks created in the blockchain, rewards to miners are being halved. Obviously, the halving process is referred to as the “planned reduction” in rewards that miners receive. To add, the halving process occurs roughly every four years or so, or to be precise, every time the blockchain reaches 210,000 transactions.
Bitcoin Halving Years and Rewards
For every 210,000 blocks mined (or every four years), rewards to problem solvers are significantly reduced to half. This gives Bitcoin the capacity to continue its circulation in the digital market to ensure that all cryptocurrencies are in the flow. Although you might think this isn’t a necessary process, Bitcoin creators see this as a great step towards their dwindling finite supply.
The blockchain encompasses 21,000,000 Bitcoins, 18,361,438 of it is currently used as of this moment. Moreover, the BTC count changes every ten minutes after new blocks are mined. And when a new block is solved, a Bitcoin value is added into the circulation. So in this case, there are 2,638,562 left to be released via mining rewards.
Bitcoin’s existence happened in 2009. Each time a miner solves a new block, 50 BTC is released as a reward.
After four years, the first halving took place. From 50 BTC, rewards sent to miners were reduced to half, earning them 25 BTC.
Another four years passed and the reward is lessened to another fifty percent, giving 12.5 BTC gifts to miners who solved a complicated math problem.
Now, we’re headed in the fourth phase of Bitcoin halving.
Though the exact date for Bitcoin halving isn’t known (primarily due to fast transactions of mining Bitcoins), the halving reward will become 6.25 BTC value for every block solved.
Does Bitcoin Halving Increase Bitcoin’s Value?
There’s still an ongoing debate regarding the halving process affecting the Bitcoin’s value. But certain evidence points out that halving rewards that miners get in the last years correlate with the token’s price. For example, the halving that took place in 2012 increased Bitcoin’s value from $11 to approximately $1,150. Another incident that caused miners an unbeatable blockchain was in the wake of 2016, wherein Bitcoin’s value soared up to $20,000 with only an initial value of $650.
According to an article published by Investopedia, a theory exists between halving and Bitcoin’s blockchain. It goes like this:
When the reward is halved, the inflation is reduced as well. This means there would be lower and limited supply in the market, but with higher demand and price. Meanwhile, Bitcoin will remain in circulation, and miners still receive their rewards for solved blocks despite lessened incentives in the digital market.
If in case that the Bitcoin halving did not increase the demand and price, then miners wouldn’t be rewarded as much for completing certain transactions. They tend to receive smaller Bitcoin value and discourage them from keeping the circulation up and going. Fortunately, Bitcoin’s halving process in the last years resulted in a positive outcome. This enabled price inflation but a major price drop hereafter.
As miners, we should rely on the past halving processes’ performance. Although there exists much evidence that contributes to the efficacy of Bitcoin halving, there’s no guarantee that the same thing will happen in its fourth process. The past performances don’t provide a solid foundation in answering your what-ifs, hows, and whys. So make sure to get plenty of information about Bitcoin value and its impacts on your future trading.
What Do You Need to Do During Bitcoin Halving?
You see, there’s nothing for you to bother about this process. You don’t need to worry about this big event because it won’t affect the Bitcoins in your wallet. Bitcoin halving process directly affects the rewards miners get, and not totally the value of the cryptocurrency in the digital market. So relax, your Bitcoins will be safe before, during, and after the halving process!
How Miners Make Bitcoin?
You’ve probably heard “Bitcoin mining” a hundred times in my posts. You also might wonder how sophisticated, complicated, and intricate the processes are once you delved into the world of digital currency. Yet, I’ll tell you this: Bitcoin mining isn’t really that difficult, so you don’t have to go too far in understanding how it works!
The Better Traders‘ courses will help you a lot regarding this matter. I’m one of its coaches and I can assure you that investing your time on this platform is all worth it. You get a whole education on trading your cryptocurrencies successfully.
As one of the basics, miners perform Bitcoin mining by using high-powered machines and Autobot systems. These systems allow miners earn the full benefits of trading digital currencies in the virtual market. If you’re looking for a crypto trading bot you can use to increase your success, I published a post for my top three picks of crypto trading bots.
back to Bitcoin mining
Every process you do, combined with luck and hard work, rewards you in the future. For instance, using crypto trading bots help you solve a block and get an incentive for it. Bitcoin mining also refers to a process of adding transactions to Bitcoin’s blockchain, serving as the network’s digital ledger. It secures the Bitcoin circulation by distinguishing transactions that are legitimate from not and avoiding transactions where miners tend to re-spend the money that they already consumed somewhere else.
As we all know, specialized computers help traders in mining Bitcoins. Nevertheless, our role during the process is to secure the network and process every single transaction made in the Bitcoin network. As miners, we impose special participation on this one; and that is to solve computational problems to create new blocks in the market. If it weren’t for us, then the Bitcoin market will be a breeding ground for attackers and vulnerabilities. For this type of service that we do, we are rewarded with newly-created Bitcoin values and transaction fees.
Further, there are three important aspects of why Bitcoin mining is important. First, this process issues new Bitcoins, in which block solvers are rewarded every ten minutes. Second, miners help the digital market confirm and verify each and every transaction made. Miners typically ensure that transactions are secure and complete. And lastly, miners make protect the Bitcoin network. In this case, I can say that the more the miners exist, the securer the network will be.
Bitcoin Halving Impact to Miners
So what does this process have for miners? A catastrophe or a favorable event? Bitcoin halving will take place any time this week, so make sure you’re fully prepared for it.
Cutting the rewards into half allows miners to see the process as less incentive, questioning the profitability of Bitcoin mining in the long run. Miners also need to consider the target difficulty, since the rate is primarily affected by the hash value. Therefore, if miners see Bitcoin halving as their exit point, then the target down will be tougher. This brings an opportunity to new miners and “resets” the blockchain network.
Bitcoin halving has short-term impacts to Bitcoin miners. Steve Tsou, the global CEO of RRMine, believes that the halving that will take place anytime today will have drastic impacts, especially on miners. He enumerated that, “1) Miners with low mining efficiency will be forced to pause and re-evaluate their business operations. 2) Digital mining is becoming the racetrack for giant international companies because they have more advanced machines and cheaper sources of electricity.”
What’s more, Bitcoin miners need to update their machines to stay competitive. The founder and CEO of Plouton Mining, Ramak Sedigh, suggests that miners who aren’t capable of upgrading their infrastructures to the 2500W miner and equipment to the 70+TH/s to sustain their trading and mining journey. If you’re one of those miners who need to improve resources, I recommend you to sell some of your Bitcoin and pay for the upgrades before the halving process begins.
Although there’s still a heated debate around the impact of Bitcoin halving on a miner’s profitability rate, you need to understand how it will impact your current worth. As such, no increase in Bitcoin’s value would mean the inability to sustain Bitcoin mining any longer; unless you’re running a major mining center.
Luckily, miners still have the chance to recover from their lost profits. Miners can get the same amount of BTC rewards by running the computations twice and increasing electrical costs. You see, the trading and mining process involves maximizing profits and keeping the costs low. You might also need to consider your hash rate, Bitcoin price, electrical power consumption, and cost of electricity carefully.
So that’s a wrap!
In this article, I covered the basics of Bitcoin mining and its impact on the creation of new blocks in the blockchain. I also elaborated on the important concepts behind Bitcoin halving, along with its impacts and consequences to miners.
Hopefully, you enjoyed reading this article. To aim a better approach of securing your Bitcoins in your wallet, you may want to try enrolling in a course that best fits your trading journey. It’s called The Better Traders 15 Minutes to Financial Freedom and these courses cover insightful techniques on how to become a smart trader.