We see the term halving more and more often, accompanied by the fact that it affects the price of Bitcoin and consequently other cryptocurrencies. But do we know exactly what is Bitcoin halving, what is its purpose, and what is its impact on the Bitcoin price?
Before talking about halving itself, it is important for us to talk about a protagonist of the crypto ecosystem, "The Miner". A miner in the crypto world is a person or entity that uses its computational power to perform the mining process. This process involves the validation of transactions and their incorporation into the blockchain, which is the public and distributed registry where all transactions of a cryptocurrency are stored.
To explain the concept of "computational power" it is like a computer solving mathematical calculations. The stronger it is, the more calculations it can solve in less time, which leads to higher profit.
When a miner solves an algorithm, he proposes a new block of transactions to be added to the blockchain. As a reward for his work, the miner receives a certain amount of the cryptocurrency, in addition to the transaction fees associated with the transactions included in the new block.
The mining process is also what brings new units of the cryptocurrency into circulation, in a process that resembles real-world precious metal mining, hence the term "mining." This reward mechanism incentivizes miners to contribute their computing power to the network, which helps keep it secure and operational.
Going back to halving, this event, which occurs approximately every four years on the Bitcoin network, consists of halving the reward miners receive for mining and validating transactions that occur on the blockchain.
It is designed to control the supply of Bitcoin and maintain its value over time. By halving the amount of new Bitcoins created, it lowers inflation and ensures scarcity of this cryptocurrency. This mechanism has similar characteristics to the effect of mining precious metals such as gold, where the amount of gold mined and added to the market decreases over time, which can contribute to the appreciation of the value of gold.
Halving serves a dual purpose: to ensure Bitcoin's longevity by limiting its total to 21 million and to reduce its supply inflation. This policy of decreasing supply is critical to maintaining Bitcoin's value over time, potentially driving its price to new all-time highs in the context of growing demand.
With the addition of Bitcoin ETFs, a new avenue for investment in cryptocurrencies has opened up, especially for institutional investors. This has expanded investment possibilities and added to the upcoming halving is expected to have a significant impact on its price to levels never seen before.
It is worth remembering that the last bitcoin will be mined around the year 2140. This time horizon underscores the long-term vision behind bitcoin: a currency designed not just for the present but for future generations.
Bitcoin halving is more than a technical event; it is a reminder of the innovation and audacity behind the first cryptocurrency. As we move toward the 2024 halving, it is clear that Bitcoin remains a disruptive force in the financial world, with the potential to redefine value and economics in the digital age.
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