Miners earn bitcoin for verifying transactions. Although they verify thousands of transactions daily consuming huge amounts of computing and electricity they are paid very little for their efforts. They are paid in Bitcoin with the hopes that the value of the bitcoin will continue to rise increasing their rewards and profits. This “payment” is the only way that new bitcoins are generated and put into circulation. This controls the supply factor of bitcoin and thus increase in demand pushes prices upwards.
The Bitcoin blockchain original coding allows for only 21 million Bitcoins to ever be issued. The original concept was based on the miners being paid less and less Bitcoins as the value of the bitcoin increased.
“This feature is programmed into Bitcoin and occurs every 4 years (210,000 blocks). This will continue until the last bitcoin is mined in 2140. The next “halving” is set to happen 90 or so days from this writing reducing the block reward to 6.25 BTC every 10 minutes.” says Hackermoon.
The Halvening Event (Halving)
The halving or Halvening event reduces the supply of new Bitcoins being issued by half, many believe that this event will send the price of Bitcoin skyrocketing. When Bitcoin halved in 2016 the price soared immediately after.
Many enthusiasts ask what happens where there are no new BTC to mine. Well, eventually the transaction fees for bitcoin will become valuable. Meaning the miners could begin to start charging a fee or use the data in other means to generate income and keep the process going, or the rise in the value of bitcoin will be significant enough that the miners what to keep the blockchain successful and operational. So while mines will no longer be paid in bitcoins they will still get paid.
18 million in circulation
Today there are between 18 – 19 million bitcoins in existence which means that we are growing quickly to the maximum supply of 21 million coins.
At this writing, we can expect the halving to take place between May 14-18 but no one knows because it is exactly when the 210,000 new block is generated. It is in the coding and the programming will automatically cut the price paid to miners.
What Does Halving Do
Basically, Bitcoin having cuts down the supply of new Bitcoins coming into circulation is does not change the number of bitcoins that have been already issued. But by cutting the supply rate the value is expected to increase sharply. There is no guarantee, we can only rely on previous event.
The first halving took place on November 28,2012 when Bitcoin was still in its infancy. The price was $11 and climbed to $12. Don’t you wish that you had bought bitcoin then, just a mere couple of years ago. The second halving took place on July 9, 2016 and price moved from $576 to $650.
Keep in mind that the bitcoin and cryptocurrency industry has changed drastically over the past few years so this is only a historic analysis about what happened in the past. Traders are unsure of what to make coming this May. Will history repeat itself.