Bitcoin halvings: an outlook into the past and future projections

Bitcoin halvings: an outlook into the past and future projections

Time Stamp: July 22, 2023 1:00 AM
  • Key milestones, price volatility, and increased investor interest have marked the route to Bitcoin’s halvings.
  • The Bitcoin network had its first halving event on November 28, 2012, which lowered the block reward to 25 BTC.
  • Although it is impossible to precisely predict how long it will take to add entries to the Bitcoin blockchain, most estimates indicate that the next halving will happen in early April 2024.

Understanding the Bitcoin network fundamentals

One must first comprehend how the Bitcoin network functions to describe a Bitcoin halving. Bitcoin’s core technology, blockchain, comprises a system of computers (known as nodes). These nodes execute Bitcoin’s software and store a partial or entire record of all network transactions.

In Bitcoin’s network, each complete node containing the entire record of Bitcoin transactions is responsible for authorizing or rejecting a transaction. Consequently, the node performs a series of tests to ensure the transaction’s validity. Among these include guaranteeing the transaction involves the proper validation criteria and does not exceed the appropriate length.

Every transaction is separately approved. This only happens after all transactions within a block have undergone validation. After approval, the transaction is added to the existing blockchain and published to other nodes.

Adding additional blockchain devices (or nodes) improves its stability and security. On May 31, 2023, estimates showed that 17,195 nodes were executing Bitcoin’s code.

Although anybody can join the Bitcoin network as a node if they have sufficient storage to obtain the whole blockchain and its transaction history, not all are miners.

What is Bitcoin mining

Bitcoin mining represents how individuals use computers or mining equipment to process and validate transactions on the blockchain network. Bitcoin employs a protocol known as proof-of-work (PoW). Proof-of-work means that solving the encrypted hash requires time and effort. This serves as evidence that work was performed.

The expression mining does not refer to extracting precious metals in its literal sense. When a block is full of transactions, it is sealed and placed in a mining queue. Once a transaction gets queued for verification, Bitcoin miners vie to discover a number with a lower value than the hash. The hash represents a hexadecimal number. The number comprises the preceding block’s encrypted data.

Mining verifies the authenticity of a block’s transactions and creates a new block. In a sequence of confirmations, nodes validate the transactions once more. This process generates a chain of information packets, which forms the blockchain.

Read More: Is crypto mining experiencing an irreversible downfall?

What is Bitcoin halving

Cryptocurrency miners get rewards with a portion of the currency every time they contribute new entries to the Bitcoin blockchain. This is known as the block reward. Bitcoin halvings remain an integral component of the protocol. They cut the block reward by half every 210,000 blocks. Due to the dynamic character of the Bitcoin blockchain, it is difficult to predict when future halvings will occur precisely.

The time required to add a new block to the Bitcoin blockchain can fluctuate. But the protocol strives for 10 minutes. As such, the mining difficulty adjusts automatically in relation to the rate of block additions. If miners extract blocks too rapidly, the difficulty rises, whereas if they extract too slowly, it falls. This occurs approximately after adding 2016 blocks or roughly every two weeks.

In the Bitcoin universe, halvings have grown into widely anticipated events that frequently cause significant market fluctuations. There have already been three Bitcoin halvings. With a fourth on the horizon, it remains worthwhile to examine the history of these events and how they might impact the prospects of the most prominent cryptocurrency in the world.

The history of Bitcoin halvings

Bitcoin halvings

Key milestones, price volatility, and increased investor interest have marked the route to Bitcoin’s halvings. [Photo/Stormgain]

Key milestones, price volatility, and increased investor interest have marked the route to Bitcoin’s halvings. A look at the past halvings offers a better grasp of the importance of these events.

A significant increase has followed each halving occurrence in the price of Bitcoin. In simple terms, the price at each successive halving has surpassed the price at the prior event.

Before Bitcoin’s historic inaugural halving event in 2012, a period known as the pre-halving era influenced the cryptocurrency’s early days. This period, which lasted from the introduction of Bitcoin on January 3, 2009, to November 28, 2012, saw significant advancements and created the framework for the digital asset’s future.

During this time, the Bitcoin system gave crypto miners a large block reward of 50 BTC. Notably, the enigmatic entity Satoshi Nakamoto, Bitcoin’s pseudonymous inventor, actively participated in Bitcoin mining and acquired a significant sum of the digital currency. According to estimates, Nakamoto potentially mined between 750,000 and 1.1 million BTC, making them one of the world’s wealthiest persons if still alive.

The first halving event

The Bitcoin network had its first halving event on November 28, 2012, which lowered the block reward to 25 BTC. This marked the start of the first halving cycle, which coincided with Bitcoin’s ascent to mainstream acceptance. During this time, Bitcoin gained prominence for its use on dark web markets, including Silk Road. Furthermore, the collapse of the Mt. Gox Bitcoin exchange received extensive media attention.

The second Bitcoin halving

On July 9, 2016, the second Bitcoin halving happened, bringing about a new era featuring a block reward of 12.5 BTC. This stage saw more rivalry for Bitcoin in the cryptocurrency sector as Ethereum emerged as a viable competitor. The popularity of Initial Coin Offerings (ICOs) also led to the creation of a crypto market bubble, which peaked in late 2017 and early 2018.

Despite the increased competition, Bitcoin investors still made significant returns, with the price rising to over $20,000 throughout this cycle.

The third halving event

The widely anticipated third Bitcoin halving occurred on May 11, 2020, decreasing the block reward to 6.25 BTC. This incident propelled Bitcoin into unknown territory, with its market capitalization exceeding $1 trillion for the first time. Bitcoin’s value soared to an all-time high of $67,450, capturing the attention of both professional investors and a wider popular audience. As the current halving cycle progresses, the Bitcoin community anticipates the coming fourth halving with anxious anticipation.

Although it is impossible to precisely predict how long it will take to add entries to the Bitcoin blockchain, most estimates indicate that the next halving will happen in early April 2024. As the halving draws near, these projections become more precise.

How many Bitcoin halvings will happen?

So far, 19.22 million BTC have been mined from a maximum supply of 21 million BTC. The remaining Bitcoin gets scarcer as the mining process advances, increasing rivalry among crypto miners. Bitcoin miners can no longer earn block rewards after mining all 21 million BTC. Instead, miners will depend only on consumer transaction fees as their reward.

Numerous Bitcoin halvings will occur in the future since these occurrences will continue until the final Bitcoin is mined. There will be 32 Bitcoin halvings, meaning 29 halvings are yet to come.

The future of Bitcoin halving remains of considerable interest to enthusiasts, traders, and investors. Historical patterns surrounding Bitcoin halvings have created optimism within the Bitcoin community, notwithstanding that past performance offers no guarantee for future results.

As the crypto community prepares for the approaching Bitcoin halving in 2024, it is worth noting that by then, around 93.7 per cent of the current Bitcoin supply will have been mined, leaving a decreasing quantity of new coins entering circulation. Reduced block rewards from halvings contribute to the Bitcoin scarcity narrative, fuelling expectations of increased demand and a potential price increase.

Market impact of Bitcoin halving events

Bitcoin halvings have enthralled the cryptocurrency industry, corresponding to crucial times defining the mining economy and provoking market cyclical price changes.

Bitcoin’s scarcity due to periodic halvings is a driving force behind its value proposition. Bitcoin has attracted the attention of institutional investors and public audiences due to its limited supply and rising demand. This one-of-a-kind economic model adds to the story of Bitcoin as a store of wealth and a possible inflation hedge.

While the precise effect of future halvings on the Bitcoin market remains unknown, historical patterns indicate that halvings often coincide with greater market activity and upward price trends. Market players actively follow these occurrences, seeking investment and speculating possibilities.

As the cryptocurrency sector evolves, Bitcoin halvings remain a focal point for market players. They are an important tool for regulating the issue of new Bitcoins, influencing the supply and demand dynamics of the digital asset. It is unclear if the tendency of price increase after each halving will continue, but speculation and anticipation around these occurrences continue to captivate the crypto community’s attention.

In conclusion, Bitcoin halvings remain extremely significant for the crypto sector since they regulate the mining economy and stimulate market dynamics. With 29 more halvings to come, Bitcoin’s limited supply and prospects for further scarcity continue to pique market players’ interest. As the sector approaches the final Bitcoin mined, the crypto community looks forward to future halvings and their influence on the ever-changing Bitcoin ecosystem.

Read More: Africa’s potential for becoming a crypto mining hub

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