Halving
What does Halving Mean in Crypto?
In the world of digital currencies, halving is a term used to describe a unique process that aims to regulate the release of new coins into circulation. In essence, halving refers to a scheduled event where the rewards given to miners for successfully validating a block are cut in half. This practice is designed to ensure that the cryptocurrency in question will experience a gradual and steady release of new tokens until it reaches its maximum supply.
in the case of Bitcoin, new coins are produced as part of a process called mining. This involves validation of new blocks, with miners receiving compensation in the form of newly created BTC.
To ensure a gradual reduction in the block rewards, the halving occurs every 210,000 blocks, or roughly every four years, resulting in a 50% reduction. The block reward was initially set at 50 BTC and has since been reduced to 25 BTC in 2012, then to 12.5 BTC in 2016, and then to 6.25 BTC in 2020. The next halving is expected in April 2024, which will decrease Bitcoin block reward to 3.125 BTC.
After 32 halvings, the maximum supply of 21 million BTC will be reached, and the process of creating new Bitcoins will come to an end.
Why Does Crypto Halving Happen?
Bitcoin mining uses crypto algorithms, processing power, and a proof-of-work consensus mechanism to solve complicated mathematical problems to verify new transactions in the network. For this effort, Bitcoin blockchain rewards miners with new crypto coins or block rewards.
Bitcoin’s mining algorithm is designed to search for new blocks roughly every 10 minutes. As more miners join the network and add more computing power, the time required to find new blocks decreases. To maintain a 10-minute block time target, the mining difficulty is adjusted.
With a limited supply of 21 million units, the generation of new BTC will cease once the maximum number has been reached. To gradually reduce the number of BTC produced, it undergoes these halving events. This makes Bitcoin more scarce and valuable, reinforcing its position as a valuable digital currency.