This is a process whereby the mining reward for bitcoin miners is halved. This happens occasionally which is even said to be after every four years. And it also happens after at least 210,000 blocks have been mined.
The occurrence of Bitcoin halving reduces the reward of miners by half after many or more blocks are mined.
The policy of halving was constituted into the blockchain mechanism and mining algorithm to reduce and prevent inflation by balancing between scarcity and availability. The idea is to prevent inflation by reducing the outward production of Bitcoin halving miners' rewards. So this will increase the price and leave the demand the same.
And since this housing policy has been in use, only a 2% inflation rate has been recorded for Bitcoin and it will continue to decrease with future halving. However if not for this policy compared to how the inflation was before at 9.1% annual rate.
The scarcity is what is maintaining the treasury bill value of bitcoin because when the world goes down supply stays the same all goes down also. Chief operating officer of Bitcoin IRA, Chris Kine said: " Increasing demand at a time when supply is constrained has a positive impact on price which can make bitcoin alluring to investors".
The technical idea behind Alvin is that whenever new blocks of the transaction are added every 10 minutes and which is also said to be roughly 9.5 minutes, the Bitcoin is programmed to cut mine as a word whenever the total numbers of active blocks are 210,000. And from the recorded experience and forecasted calculation, before 210,000 active blocks are created it takes up to four years and close.
To understand halving better, mining needs to be explained. In a brief, mining is one process where mine is mine to authenticate or verify and add a new block to the blockchain network for a cryptocurrency. Miners are required to have some technical ability and knowledge about blockchain and also a strong internet connection and computer with so many diverse competitive miners who mine by executing calculations behind the chains. And when the miners merge a surprisingly correct number to create a new block in the blockchain, the miner is awarded any amount of bitcoins that are newly minted.
And according to Bitcoin worldwide: "As of August 2021, 83% (18.78 million) of all Bitcoins have already been mined. This leaves a little more than 2 million Bitcoins left to be mined. Also, there will only ever be 21 million Bitcoins mined and allowed into circulation."
This halving policy or event is important because it brings about another revolutionary drop of new Bitcoins that are produced as it approaches its limit to supply or creates more blocks: the total maximum of bitcoins that can be supplied is 21 million.
How Bitcoin has affected the price of Bitcoin
Whenever halving occurs, it reduces the block reward for miners by half which will decrease the rate of Bitcoin circulation. Before now, when miners mine a new block, the reward was 50BTC at first, but as a result of frequent multiple bi-annual halving, a block now rewards 6.25BTC.
Bitcoin halving has so far brought a price increase to Bitcoin which makes miners receive less bitcoin reward because of its cost, and any price increase that will be following will be covering all possible losses. But frequent halving may later not leave the increased price stable to prevent crashes and which might also force some miners to leave.
When the reward is halved, the inflation rate is decreased and it lowers the supply and availability. And it increases demand at a high rate and also increases the price but miners will always get their incentives even if it's small the price of bitcoin increases that's where the reward seems bigger even if the quantity is smaller.
On an occasion where halving didn't increase bitcoin price and supply, then it will result in a zero for miners because the incentive for mining a block decreased and the value of bitcoin is the same.
But Bitcoin has prevented this by making it less difficult to mine when halving occurs so that miners get their incentives without the price of Bitcoin increasing and that will make it valuable to them. And this means the process of getting rewards is reduced when the price of bitcoin doesn't increase.
When was the last Bitcoin Halving?
Bitcoin has recorded three halving since its existence, the first one was on January 3 2009 when the mining reward was at 50 BTC with a block height of one Genesis.
The schedule for halving is programmed to take place after every 210,000 total active blocks have been created and it usually takes place after every four years.
This schedule or predetermined timing can change anytime because halving occurs only when the numbers of required blocks are created and it can only be met based on how fast miners can merge their mathematical puzzles to get a hash for the new block.
Bitcoin mechanism or algorithm has been built to create new blocks every 10 mins when miners solve the number puzzle, but due to the congested network and more hash rate the time of solving puzzles increases and decreases. It's now roughly estimated to be 9.5 minutes.
Looking at the past schedule, it is now taking about just 3 to 4 months or less than the four-year halving that has been forecasted to complete 210,000 blocks. And the last halving was on 2020 May 11, 2020
7:23:43 PM GMT with a block height of 630,00 and a mining reward of 6.25 BTC.
When is the next Bitcoin halving?
The next Bitcoin halving is said to occur again around May 4 or 5, 2024 with a 3.125BTC mining reward, experts predicted. A total of 840,000 blocks is expected to be created on the Bitcoin blockchain which is a multiple of 4 of the required numbers. And with the current number of active blocks which is close to the required number for halving to occur.
It's a very key point to note that halving only occurs after a certain number of bitcoins have been mined, it has no specific schedule, and it's determined by how fast miners are. The predicted dates are just estimated based on fore occurrence but with the mass adoption of Blockchain which has now brought many more miners, it's likely for the predictions to change soon.
Final thoughts
Investors and potential buyers might be in doubt about whether they should purchase at that time or now. Making fast decisions is up to the investors and also how you can stake. But deciding based on the predicted might be the wrong way because halving might be sooner than expected without us knowing.
But that doesn't mean to be a loss when buying at the halving season or staking into it. It's also an advantage because the price will increase and scarcity will be proportional at the beginning of it. So selling at that time of scarcity, high demand and price increase will bring you a high return on investment.