OKEx - Leading Cryptocurrency Exchange Demo Trading
Copied

Share articles to

Academy Industry Analysis Article

Five interesting facts that you need to know about halving

2020.04.28 何, 颖

The next bitcoin halving event is about two weeks away. As one of the most anticipated events this year in the crypto space, BTC halving (sometimes referred to as “halvening”) is when the supply of new bitcoin gets cut in half, halving miners’ block rewards. This mechanism was introduced by bitcoin’s pseudonymous creator, Satoshi Nakamoto, himself.

Now that we’ve briefly talked about its history let's drop some interesting facts you need to know about halving.

Fact #1: Halving is vital to ensure BTC retains deflation

Supporters argue that Bitcoin halving exists for several reasons. Firstly, it’s clearly stated in Bitcoin’s founding protocol that only 21 mln will ever be in circulation, which is a great relief to those who fear that government-backed fiat currency will lose its worth in inflation when the government print too much. On the contrary, the value of Bitcoin will be promised to increase due to its finite supply. The halving mechanism aims to prevent inflation by regularly declining the speed of which bitcoin is mined. Besides, some may also argue that halving exists as a hurry-up-and-buy message to accelerate people's buying power.

Fact #2: Block rewards will reduce to 6.25 BTC/block after 2020 halving

Bitcoin halving happens once every four years or so - to be more precise, every 210K blocks. After a halving, miners will receive 50% fewer block rewards for verifying the transaction. When Bitcoin was launched in 2009, miners received 50 Bitcoin per block. After the first halving in 2012, the number was diminished to 25, then to 12.5 in 2016 during its second halving. This time, the block rewards will be reduced to 6.25 BTC per block.

Source: Bloomberg

Fact #3: There are 62 halvings left before hitting the 21 mln limits

There are overall 64 halvings before bitcoin hits its 21 mln maximum, which should take place around 2140. Once miners have mined all the Bitcoins, all the supply in the world will run out. Thanks to this fixed supply (like gold), bitcoin is also called digital gold.

Fact #4: BTC price did increase after the previous halvings

Here's an illustration of halvings' effect on BTC price.

Five interesting facts that you need to know about halving
Source: Blockgeeks

From this table, we can see a substantial increase in BTC prices during its first-ever halving. Though the second halving only brought a 16.6% increase in price, experts argue that this is because most of the poeple in the crypto space was hugely looking forward to the event. Any anticipated price measures could already priced in. So, if BTC prices after the 2020 halving aren't soaring, don't be surprised.

Fact #5: Bitcoin block rewards will be reduced to zero eventually

By the 64th halving event, the last bitcoin will be mined, and miners will have to gain their income 100% from transaction fees (just like credit card companies do) instead of receiving block rewards. Nakamoto wrote: “In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes. I'm sure that in 20 years there will either be enormous transaction volume or no volume.” So, what incentive will be left for miners to help verifying bitcoin transactions by then? Maybe that is something that is worth a discussion.

Conclusion

In our previous publication <OKEx Technical Weekly: Apr 27, 2020>, we highlighted the possibility that BTC prices could only be pushed marginally higher by the positive sentiment built around BTC halving. However, It is still too soon to jump into a conclusion about whether BTC will follow its previous rallies or will the new factors turn the table around.

Exclusive Reward for Newcomers

Earn free bitcoin worth $10 by signing up & placing your first order!

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

Recommended

industry-analysis-en