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  • Writer's pictureScott Spanier

7. Halving

As mentioned in the last article, miners have a large role in deciding the future of the blockchain. With Bitcoin however, miners don't have control over their rewards. In it's early days, miners received 50 Bitcoin as a reward for each block they mined (that's just over $2 Million at today's value). Unfortunately for miners, that amount gets cut in half every four years, roughly.

 

I find it ridiculous that I, along with everyone else it seems, has to say this but - This is NOT financial advice! - I enjoy sharing my interests and educating people on what I know but somehow it has become necessary for myself, and others doing the same sort of thing, to explain that I am not insinuating any form of advice in any way... Anyways.


The reason for halving is that as the value of the coin increases over time, the reward should be worth less. Since the reward is the coin itself, the only way to do this is to reduce the number of coins rewarded. What this has resulted in is a four year cycle in which the value of Bitcoin skyrockets as seen in 2013, 2017, and 2021. This cycle appears to be decreasing as investors anticipate the halving spike and invest before the halving occurs. While other factors have caused large spikes over the years in 2010 and 2015, there seems to be some level of consistency with the halving spikes and the long term growth that still remains after the large fallouts of each spike.


Most speculation around the reason for these spikes that have resulting from halving are that of supply and demand. Since there is a finite amount of Bitcoin that will ever exist (21 million), the halving results in less supply being driven into the market by miners, therefor increasing the demand.


Whether this trend will continue into the future is anyone's guess. Until then, be sure to check out my next article next week on how much cryptocurrencies are actually worth!

P.S. It won't be a dollar amount ;)

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