The moment has arrived for “The Halving”. Despite receiving no significant coverage in the mainstream media such as the New York Times and being superseded by the likes of coronavirus coverage, the Halving is actually quite a big deal. The Halving is one of the most anticipated moments in cryptocurrency history due to the rewards it may reap for investors. In a nutshell, the event is the reduction of the number of block rewards, or bitcoins, coming into circulation being halved from 12.5 to 6.25. The Halving has occurred twice previously in the history of bitcoin, occurring every four years. The hope of investors is that the Halving will result in a spike in wealth, for while the supply of new bitcoin will be reduced, demand will theoretically remain as is, increasing the desirability of each individual coin. This should drive up the price per bitcoin.
Though the hopes of investors lie in this short-term price fluctuation, the longterm effect for bitcoin may be the transformation in the function of bitcoin, since the minting rate will also decline. Aside from investing in and trading bitcoin, those who engage with the currency sometimes also mine it. Mining is incentivized by the minting rate, and is a vital aspect of the security architecture of bitcoin. Mining, in effect, encrypts transactions. As more bitcoin enters circulation and each Halving occurs, the reward for mining will dwindle, possibly undermining the security apparatus of bitcoin.
In the eleven years since bitcoin’s release, not all bitcoins have entered circulation. The “birth” of each bitcoin is as a block reward uncovered by miners, or those who engage with bitcoin by mining the algorithm through enormous computing power, generally within a group of other miners. Every 210,000 blocks, or approximately each four years, a Halving occurs in which the total amount of bitcoins available to be mined is halved. In 2009, at the beginning of bitcoin, within each ten minutes, fifty bitcoins could be mined. The rate halved twice previously to reach the rate of 12.5 coins per ten minutes, which this Halving cuts to 6.25 per ten minutes. In about the year 2140, the entire process will be finished when the total sum of 21 million bitcoins enters circulation. This demonstrates how much more lucrative mining bitcoin was in 2009 than it will be in 2021.