Everything There Is To Know
The quantity of Bitcoin distributed to cryptocurrency miners undergoes a reduction by fifty percent every four years in an event commonly known as Bitcoin halving, or as imaginatively referred to by some; halvening. In order to fully understand what the Bitcoin halving is, it is necessary to understand the theory behind its supply. In this article, we will discuss the underlying mechanics and reasons behind this process.
Satoshi Nakamoto, the inventor of Bitcoin, believed that scarcity had the potential to create value where there was none previously. His notion can in essence be observed through examples such as the uniqueness of the Mona Lisa since there is only one of it, the limited quantity of Picasso’s works, and the finite supply of gold on Earth. Ever think why Bitcoin was so revolutionary? Unlike traditional digital goods that can be easily replicated, Bitcoin implemented a limited supply,creating a sense of scarcity and intrinsic value. And it was this unique characteristic that contributed to its innovation and the subsequent rise of cryptocurrencies.
What is the Bitcoin halving?
There is a strict limit of 21 million coins that can ever be created in the Bitcoin code. This controls the supply while ensuring the security of the network. Miners play a vital role in this, considering the fact that they are responsible for securing and maintaining the Bitcoin ledger. And so, new Bitcoin is only created through mining and miners are rewarded with the newly minted Bitcoin for their efforts.
However, there is a catch!
The mining reward is cut in half approximately every four years and each halving reduces the rate at which new Bitcoin enters the circulation –a process that will likely continue until 2140. Now what is the reason and theory behind all this this?
What is so special about the Bitcoin halving?
If someone, an organization, or a government is trusted to establish the money supply, they must also be trusted to not tamper with it. Bitcoin is decentralized and unreliable as there is no one to trust, so there must be strict rules about how and how much it is created. By writing a fixed total supply and halving mechanism into the Bitcoin code, Bitcoin’s monetary system is literally set in stone and impossible to change. This
“hard cap” is what makes Bitcoin be the “hard money” it is, just like gold.
Follow Xapa on social media and stay tuned for more!
