Bitcoin halving and its economic importance

[DubemIfedigbo001]

Bitcoin halving is simply an event that reduces the number of new bitcoin that miners receive for validating transactions on the bitcoin network. Bitcoin network uses POW (proof of work) mechanism to validate transactions and add a new block. on the addition of every 210,000 block, bitcoin halving occurs, and this event is estimated to occur every four years with the last one occurring in 2020 and the next one stipulated to occur in 2024. here is a chart to further illustrate the history of halving and the new rewards miners received after each halving.



As you can see, the halving reduces the number of newly minted bitcoins awarded to miners and decreases bitcoin in circulation which brings about an increase in the price of bitcoin. The newly minted bitcoin received by the miners makes more bitcoin to be available to the markets. Bitcoin is expected to be fully mined by 2140 when the last halving will occur and the total of 21 million bitcoin should have been in circulation. the next halving will see miners receive only 3.125 btc for each block of transaction validated.

Economic Importance of Bitcoin Halving
Bitcoin halving limits the quantity of bitcoin given to miners as a reward for their jobs of transactions validation and thus introduces scarcity of bitcoins. The golden rule of demand and supply in economics states that decrease in supply with increase in demand or same level of demand tends to increase the value of a commodity. As such, the less the supply of bitcoin to the markets, its value will significantly increase, and it is this phenomenon that is known as the bull run. The bull run is accompanied by profits as the price increases.

All investors whom have been hodling bitcoin will make great profits after the halving including miners who will push bitcoin into the markets. The chart below validates the significant increase in price of bitcoin after each halving.



Note that the price does not increase much immediately after the halving, but over time, say gradually and it increases very well after maybe a year after the halving took place. Also observe that it does not reach its peak until after some time, so don't be in a hurry to sell immediately it starts appreciating, HODL a little longer and you'll get better gains.

when Bitcoin reaches maximum supply (21 million in circulation), this will mean that miners will no longer be rewarded with newly minted bitcoin for their services as there will be no more than 21 million bitcoins in circulation. Another incentive would be crafted for them to support their work and it would be from the transaction fees paid by the people that use the network. This might cause transaction fees to be significantly higher in the future.

In conclusion, bitcoin halving is of great economic importance, Bitcoin halving does have a significant impact on the price of bitcoin, and this is a wakeup call to all investors and potential investors to continue or start hodling Bitcoin as a major breakthrough is around the corner.

https://www.gate.io/learn/articles/what-is-bitcoin-halving-and-why-is-it-important/175
https://cointelegraph.com/learn/bitcoin-halving-how-does-the-halving-cycle-work-and-why-does-it-matter

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[MusaMohamed]

Bitcoin halving is simply an event that reduces the number of new bitcoin that miners receive for validating transactions on the bitcoin network.

Bitcoin miners get bitcoins through Bitcoin block rewards and Bitcoin transaction fees.

What you said is about Bitcoin transaction fees which paid by Bitcoin users who need Bitcoin miners to confirm their transactions. To get confirmations, they must pay transaction fees and a higher fee rates they use, the higher priority for their transactions in mempools so that their transactions will be confirmed faster than other transactions with lower fee rates.

Bitcoin halving is about a half reduction in Bitcoin block rewards. It's what you missed.

[DYING_S0UL]

OP, move this thread to Bitcoin Discussion board. All topics related to Bitcoin is meant to posted in Bitcoin Discussion. You are in wrong board.

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[cryptomaniac_xxx]

Just to note though, the last 1% of bitcoin that is going to be mine will be technically be -/+ 2140, so I don't think that we will witnessed that in our natural life. So just don't overthink about it, sooner or later we will reach 99% and that's where all bitcoin is already been mined or 99% of it.

So it could be in the next 3 halvings. And with that, the price as speculated could reach as high as $750,000 - $1 million.

This is just a wild and educated guess though, so take it with a grain of salt.

And if you haven't experienced a block halving, no worries as well, just continue to accumulate and see how it goes next year.

[un_rank]

when Bitcoin reaches maximum supply (21 million in circulation), this will mean that miners will no longer be rewarded with newly minted bitcoin for their services as there will be no more than 21 million bitcoins in circulation. Another incentive would be crafted for them to support their work and it would be from the transaction fees paid by the people that use the network. This might cause transaction fees to be significantly higher in the future.

Transaction fees is already part of the reward that goes to miners, it will not be 'crafted' when all the bitcoins have been mined. What will happen then is that transaction fees will be the sole reward for miners of the network.
With the rate of halvings and shrinking of the coinbase reward, transaction fees could be the major source of mining reward in the next 5-7 decades i.e, the amount gotten from fees will be higher than the mining reward.

- Jay -