Bitcoin Undergoes Fourth ‘Halving’ Event
Bitcoin, the decentralized cryptocurrency created by the pseudonymous Satoshi Nakamoto, has undergone its fourth deflationary evolution, reducing the block reward to 3.125 BTC.
The much-anticipated fourth Bitcoin “halving” event has come and gone with little fanfare or market reaction. Many participants noted that the change was already priced in by market makers.
Bitcoin “halving” is a pre-coded software update that reduces the reward for miners–network operators who play a crucial role by devoting their processing power to the “discovery” of new coins. These halving events occur every 210,000 blocks mined, historically equating to one halving event every four years.
Speaking to The Block, crypto exchange Kraken’s head of strategy Thomase Perfumo explained that this halving was possibly the “most significant” yet:
“Firstly, after April 2024, nearly 95% of all bitcoins that will ever exist will have been mined. Furthermore, the annualized growth of bitcoin’s supply each year will soon fall to less than 1% for the first time,” Perfumo said.
These changes might result in some network underperformance as some players choose to exit the market, as Binance CEO Richard Teng cautioned:
“The Bitcoin network has shown resilience in the face of such challenges in the past. Advancements in mining technology and strategies, as well as potential adjustments in mining difficulty, could mitigate the impact of reduced miner participation,” Teng said. “Additionally, some miners may opt to switch to mining altcoins or explore alternative revenue streams within the crypto space, which could help maintain a balance in the overall mining ecosystem.”
But for those speculating on the future price of the cryptocurrency, halving events are often a moment of jubilation. Billionaire Tim Draper explained his cause for celebration to Cointelegraph, predicting that the price may rise up to $250,000.
“The simple reason that Bitcoin price goes up after the halving is that the supply goes down, and with continued upward pressure on demand, the price goes up naturally in a free market,” he said.
When Nakamoto launched Bitcoin in 2009, the block reward distributed to miners amounted to 50 BTC. The first halving event in 2012 reduced this reward to 25, and the subsequent rounds in 2016 and 2020 reduced this reward further to 12.5 and 6.25, respectively.
Bitcoin incorporates a hard cap of 21 million on the total number of coins able to be discovered. With blocks–components of the public ledger that validate transactions processed during a given period–averaging 10 minutes for their discovery, the network will continue to produce new coins for miners until 2140.
At this point, miners will still profit from their involvement in the bitcoin infrastructure, but will do so solely by collecting fees from end users sending bitcoin to one another.
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