Mining Through the Bitcoin Halving
It’s that time of the cycle again. Awaited with much anticipation by blockchain enthusiasts, retail investors, and media outlets, the Bitcoin halving event keeps everyone on their toes. The clockwork uptrend in price movement over the past year was once again interrupted by growing volatility, which has now led to a major market correction. Pairing the upcoming halving event with a sizeable macro-economic, geo-political, or socio-demographic incident makes it all the more exciting for the public observer. While the crypto market has been correcting for a while now, which is to be expected after reaching new heights, geo-politics and threats of war may have given Bitcoin and the altcoin market a significant final scare down the rabbit hole. Looking at the graph with its regular long-term swings, the associated current events for each swing, and the financial seasonality, one might wonder if there is a method to the madness within the blockchain algorithm. There may not be a correlation between the Bitcoin cycle and everything else, but it is daunting to think that an algorithmic code has figured out human psychology. Sadly, we cannot answer that question anytime soon. To make a reliable case for or against this statement, we’ll need to see a few more halving events. For now, let’s focus on facilitating the continuous adoption of Bitcoin around the world by educating our peers as well as we can about the possibilities that blockchain technology provides for societal growth and development. This article will primarily focus on the upcoming Halving event, which is set to occur in the next few days.
Don’t Halve My Bitcoin, I don’t have Enough As Is
A French reporter recently explained in one of her news segments that the Bitcoin halving would halve the current price. It’s safe to say she did not foresee a black swan event with this statement but simply shared incorrect information with her audience. This underscores the importance for us at Fish and Chips Crypto, and other reputable learning hubs, to continue educating our readers with accurate facts.
To clarify, the Bitcoin halving does not target the price or the circulating supply. It does, however, affect the inflation rate, specifically the newly minted Bitcoin tokens that miners eagerly seek. The core idea behind this concept is to slow the inflation rate of the token supply and provide miners with enough incentive to maintain their mining rigs until all 21 million bitcoins are mined, either stored in cold storage or circulating between wallets. Currently, the side effect appears to be an acceleration in the token’s value, which makes sense when you reduce new output while simultaneously increasing the adoption rate and demand — all without a marketing budget. It’s no wonder why institutions are so infuriated by this unstoppable competitor.
Taking a Tour Through the Mine
Grab your helmet and pickaxe — we’re heading down the shaft. Satoshi missed a great opportunity to gamify Proof-of-Work. Imagine how much easier it would be if we could introduce newcomers to something akin to an immersive digital gold rush game. Perhaps the devs can still do something?
On a more serious note, let’s examine how Bitcoin is actually generated and why it is beneficial for mining companies to continue expanding, despite the rewards being halved every four years.
Bitcoin mining is the process through which new Bitcoins are created and transactions are confirmed on the blockchain. The first step involves transaction verification, where recent transactions are gathered into a block. These transactions are only confirmed once the block is included in the Bitcoin blockchain. The second step requires miners to solve a complex mathematical problem known as a “hash.” This process demands computational power and is known as proof of work (or the reason why computer hardware has become as scarce as Bitcoin itself). The first miner to solve the problem earns the right to add the new block to the blockchain.
Once the equation is solved, the miner presents their block to other miners for verification. In this third step, a majority of the miners must agree before the block is added to the blockchain. During this phase, all transactions are verified to be valid and not fraudulent, ensuring the integrity of the ledger and its recorded information.
Once the block is added to the blockchain, the successful miner receives a reward in two forms: newly minted bitcoins (whose quantity is subject to halving every four years) and transaction fees from the transactions included in the new block. This latter aspect is also a driving argument for why, even as the rewards for newly minted bitcoins decrease every four years, there is continual value for miners to stay in the business.
Lastly, the difficulty of the mining process adjusts every 2016 blocks (about every two weeks), ensuring that the rate of block creation remains steady even as the network’s power grows or shrinks.
This mining process secures the network, validates transactions, and introduces new bitcoins into the system in a decentralized manner without the need for a central authority. This not only ensures the integrity of the technology but also provides a high level of security and data accuracy, capable of withstanding nearly any form of attack against its system. For the moment, Bitcoin and its blockchain technology far exceed institutional and governmental thresholds to provide equal value to its users.
Bitcoin Might Just be the Concluding Thought
While governments around the world cannot decide whether to embrace new technology to strengthen economic fundamentals and remain relevant in a rapidly changing world, Bitcoin is unstoppably approaching its next halving event. If you are not convinced that Bitcoin is for you, that’s alright. Many assets, like commodities and real estate, can yield similar results if you aim to protect yourself against uncertain times, persistent inflation, and governments that print money as if it were confetti. Bitcoin is merely one option, and its halving event is a strong argument for why it might be a solid contender for long-term value preservation.
If you want to discuss Bitcoin, cryptocurrencies, blockchain, and other intriguing topics on your mind, we would be happy to welcome you to our community on Discord. At Fish and Chips Crypto, we are determined to bring value, knowledge, and entertainment to our community and inspire them to share their knowledge with peers. After all, Bitcoin started as a peer-to-peer concept for financial transactions. We believe we can extend this to knowledge sharing too.
Thank you for reading.
