Bitcoin Halving | What is half-life?
What is half-life?
Bitcoin halving means that the number of Bitcoins paid as a reward for mining is halved every specific cycle . This halving increases the scarcity of Bitcoin.
The creator of Bitcoin, Satoshi Nakamoto, at the time of the first Bitcoin issuance, limited the total issuance to 21 million by 2140. At the same time, if the number of mined bitcoins increases over time, the supply increases in the market and the value of bitcoins may decrease. To prevent this, the concept of a 'halving cycle' was introduced.
A halving is a period in which the amount of bitcoins obtainable by mining is halved, occurring approximately every 4 years, with every 210,000 blocks being created. The first Bitcoin halving was in November 2012, with mining rewards reduced from 50 to 25 per block. During the second halving in July 2016, mining rewards were reduced from 25 to 12.5 per block. The third halving is May 2020, with mining rewards reduced from 12.5 per block to 6.25 per block.
Impact on price
Investors are very interested in the halving because of the expectation that when the halving begins, Bitcoin's scarcity will increase and thus the price will rise. So what about the earlier halvings?
In the month following the first halving in 2012, the price of Bitcoin rose by 7%. However, during the second halving in 2016, prices fell by as much as 10% within a month. However , during the first halving, the price of Bitcoin rose by 944% and during the second halving by 38%, and both halvings showed a significant upward trend if you look at the price trend within 6 months.
In the third halving of May 2020, the most recent halving, the price of one Bitcoin was set at $8,500. However, it rose to a high of $64,700 in April 2021, about 11 months after its halving. After a brief decline, it also broke through the $66,000 mark in October 2021.
Others are of the opinion that changes in mining volume have little effect on price changes. Bitcoin investors have known for a long time that block rewards are getting smaller and smaller, and have been preparing for it for a long enough time, so there is an analysis that it is more affected by the global economy and liquidity expansion than the halving.
After the half-life is over?
In theory, after a total of 34 halvings, all 21 million Bitcoins are mined. The 34th halving is 2140, but the actual end of Bitcoin mining is expected to be much earlier than that. This is because it is estimated that about 90% of the total issuance of Bitcoin in 2020 has been mined.
Block rewards that decrease every 4 years will eventually disappear. In addition to mining rewards, transaction fees paid every time users trade bitcoins also go back to the miners. So in the future, there is a prospect that the main means of compensation for miners will be replaced by transaction fees . Bitcoin, with a limited issuance quantity, is expected to rise steadily in price due to its scarcity, and the transaction fee income will also rise.
Conversely, however , there is an opinion that miners may not be able to get enough revenue from transaction fees . This is because technical attempts to speed up transactions and lower fees on the Bitcoin blockchain are continuing.