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Bitcoin Halving 2020

Bitcoin Halving 2020 will happen sometime in May 2020. We will experience the 4th Bitcoin halving. Bitcoin halving occurs approximately every four years and is the reduction in miner’s awards (which is paid in the cryptocurrency Bitcoin). 

What is Bitcoin halving?

Bitcoin halving is when the miner’s Bitcoin rewards are basically cut into half. To make matters simpler, the first Bitcoin halving took place in 2012 when the initial reward of 50 Bitcoin went down to 25 Bitcoin. Four years later in 2016 this went down to 12.5 Bitcoin and now in May 2020 the will go down to 6.25 Bitcoin The next halving is due in about two weeks.

You can watch the halving real-time here

Ironically the POW, (Proof of work) that is required for miners to do nowadays is much more computationally complex and tedious than it was in the earlier days of Bitcoin.

How do miners earn Bitcoin?

Miners earn Bitcoin (BTC the cryptocurrency) when successfully hash an entry onto the blockchain. This is called Proof of Work which is basically the action of processing, approving and validating and encrypting transactional entries that are submitted onto the network.  

When is the next Bitcoin Halving?

With the next halving about to occur in May 2020. We can see the whole internet awash with countdowns and the expectation for the event. It is quite difficult to give a correct estimate of the exact date for the halving to occur as this depends on a number of factors that were predefined in the original Bitcoin whitepaper written by Satoshi Nakomoto and published on 31st October 2008.

Bitcoin’s volume is limited to 21 million. This means that there will only ever be 21 Million bitcoin ever in circulation. By this measure we imagine that there will be around  64 Bitcoin halving’s before the supply of Bitcoin is exhausted. It is estimated that the final Bitcoin halving would happen in 2140 or thereabouts. This means that beyond this point minors will no longer received a reward for mining but will rely on fees for the handling of transactions. 

Bitcoin Halving, what are the con’s?

Miners are obviously the ones that are most affected by the Bitcoin halving process as their rewards will be cut into half. Such events which occur approximately every four years could make one want to leave mining altogether since the huge efforts made to mine will eventually always lead to less of a rewards.

But do miners leave en masse after halving occurs? 

No, to date this does not seem to be the case. Halving means that the supply of Bitcoin is lessen and thus becoming more valuable resource. Think about it like a precious metal or stone, that only a few will hold. The limited supply remains quite the incentive. 

What does Bitcoin halving exactly mean to the price of Bitcoin?

Since Bitcoin is a limited asset, as stated in the point above, it becomes a question of supply and demand. Eventually newly minted Bitcoin will not be available, and only old coins will remain in circulation. 

After the first halving, Bitcoin experienced growth in its price per coin. Bitcoin price doubled from $12 to $24 by mid-February 2013, eventually reaching ten times its value. Market capitalization and average transaction fees, meant that holding Bitcoin and processing  transactions became more profitable when the supply rate was reduced. 

We could argue that the decrease of supply and the growing demand of Bitcoin could influence the price of the cryptocurrency. 

Should I buy Bitcoin now or after the 2020 Bitcoin halving?

At time of writing Bitcoin is looking bullish, some analysts are expecting an upcoming correction in the market which would keep Bitcoin price in the $8k zone, others are expecting the $10K mark to be hit again shortly. 

In terms of how the halving will affect price some analysts believe that the 2020 halving will only show its true effects until 2021, when BTC is expected to reach the fabled $100,000 mark. 

This is all speculation, Bitcoin is highly volatile and not a get rich scheme. Don’t invest what you cant afford to lose and this is not trading advice in any way! 

It’s worth mentioning that mass adoption has grown quite a lot since the last bitcoin halving in 2016. Bitcoin makes mainstream media nowadays and there has been a huge increase in interest in blockchain over these past four years. The response from miners, investors, enthusiasts, traders and analysts will be extremely important if we expect the market to strive past the first obstacles after it happens. However, the cryptocurrency community seems to be ready to embrace this event with open arms and is looking forward to further progress for Bitcoin.  

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Bitcoin halving vs forks?

Bitcoin halving often gets confused with bitcoin forks. so it would be good to distinguish between the two.

Forks occur when a group of developers within a blockchain community (like bitcoin or ethereum) decide to make a change in the governance model of the ledger, and fundamentally disagree. Most forks we have seen to date are related to the blockchain ledgers performance, but they can also relate to governance. If the change is accepted by the majority of the community, there’s no fork and the change is adopted to the core ledger platform. If not, then you will see a fork. 

A fork results in a newly defined ledger and an offshoot coin. Typically, those spinoffs are released with a new name and new features and often in the case of Bitcoin forks, capitalize on Bitcoin’s name recognition. After some offshoots gained adherents and made their creators money, forks grew more popular.

Creators make money if the exchanges decide to accept the fork. E.g. Coinbase accepted the Bitcoin Cash fork but it didn’t accept the Bitcoin Gold fork.

Bitcoin Cash is among the most prominent of these spinoffs. It’s “hard fork” separation from Bitcoin in 2017 set off a craze that saw dozens of software-development teams attempt to create money by tweaking the original computer code in different ways. Around two years later another coin spun off from Bitcoin Cash in the form of Bitcoin SV but doubts on the security of this coin have made it rather less popular. 

Example of Bitcoin Forks:

  • Bitcoin vs Bitcoin Cash which happened on 1 August 2017 (Hard Fork)
  • Bitcoin Cash vs Bitcoin SV which happened on 15 November 2018 (Hard Fork)

Bitcoin Halving and hash rates vulnerabilities

A hash rate is the number of computational operations that are carried out in every second during the mining process. When there are a large volume of miners active on the ledger the network processes faster and is more secure. However when a large number of miners decide to leave the ledger (say in the case of a fork), illegitimate actors would have more of an opportunity to take over large parts of the network.  This is defined as a 51% Attack.  Whilst a 51% attack is next to impossible it does present a problem when a fork occurs.

Assuming that miners’ volumes decrease when a Bitcoin halving takes place, we can also assume that the hashrate will dip. As was seen in 2012, when the first halving took place, Bitcoin’s hashrate took a small dip from December 2012 and to mid-February 2013. This obviously presents a small vulnerability to the network. 

After that, both the hashrate and mining profitability went upwards. This means that, after the dust settles, halving is actually beneficial to miners and to the Bitcoin network’s security as a whole