Halving Is — Function to How It Works | The Essential Terms
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Halving Is — Function to How It Works

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Halving Is — Function to How It Works

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Halving is one of the essential terms that need to be known by those who want to invest in digital assets. This term will often be used in the world of crypto trading and is closely related to the first crypto asset, bitcoin (BTC). This term is already familiar for bitcoin miners and is also known as “halvening”.

So, what exactly is this halving, and how does it affect the miners? Check out the full review below.

What is Halving on Crypto Assets

Halving is the reward earned by miners who successfully add new blocks to the blockchain.

It is also important to note the halving will be carried out every 210,000 blocks that are mined, or the equivalent of every four years.

As for since its launch in 2009, bitcoin has undergone a halving process three times—the term: “Halving Day”—, with the following details:

In the first year of this halving, miners who initially received a reward of 50 BTC since 2012 then only received half the reward or 25 BTC.

This second bitcoin halving has reduced the miner’s reward since this year, from the original 25 BTC to 12.5 BTC.

The most recent halving occurred in 2020, on May 11, 2020. At that time, bitcoin miners would earn only 6.25 BTC for each mining result.

What is the Function of Halving on Crypto Assets?

So, what is the function of halving crypto assets? In general, halving serves or aims to maintain the scarcity of crypto assets such as BTC.

Through the implementation of the halving, the amount of new BTC entering circulation will remain limited. Thus, its value will continue to rise.

Another question is, why do miners have to cut the yield or yield every four years? The answer is that the supply of Bitcoin is decreasing because it is constantly being mined.

How Halving Works

At the moment of Halving Day, aka when the Bitcoin blockchain cuts the rewards for miners by half (halving), when mining, the miners will spend a lot of computing energy to verify transactions.

Then, these transactions are digitally combined into a block. Each block will be united in a chain alias blockchain. Well, the miners in this blockchain act as digital auditors.

Their job here is to track and check the validity of every transaction against the crypto asset. Later, they will receive a reward in the form of BTC in a predetermined amount.

What are the Effects of Halving?

Why should there be a bitcoin halving, and what are the effects?

As mentioned earlier, halving is a method used to suppress bitcoin inflation. That way, the price of BTC will remain stable and even rise.

Usually, after the halving, the price of BTC will decrease, but a year later, the price will skyrocket.

It is also important to note that the price of BTC after the first halving in 2012 only decreased by $12, and a year later, the price skyrocketed to $1,000 per chip.

At the time of the second halving, the price of bitcoin also dropped to $670 per coin, but a year later, in July 2017, the price rose to $2,550 and skyrocketed to reach $19,700.

Meanwhile, at the last halving yesterday, which was in 2020, the price of BTC also dropped to $8,787 per coin. However, only a month after that, the cost of bitcoin rose to $48,000.

The price of bitcoin also skyrocketed to $ 50,000 per coin. According to predictions, bitcoin prices will continue to rise after the next halving period or around 2024.

However, why does that happen?

Basically, the BTC boom occurred because the existence of this oldest crypto asset was increasingly sought after. After the halving, news related to bitcoin will usually be more and more so that the demand is higher.

That’s a review about halving that you need to know. As one of the terms in the crypto world, halving is something you need to understand before jumping into the world of digital assets.

Also, check out other recent articles about the world of other crypto digital assets at Indodax Academy.

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