Approximately every four years, an event takes place on the Bitcoin network that has earned the name of “The Halvening”. Those who are just now starting to get into Bitcoin may not have heard of this term or know what it means. It simply means that the amount of new Bitcoin created and earned by the miners will be cut in half with each new block of transactions after one of these events takes place. The previous event occurred in 2016, and another halving event is estimated to take place on May 31, 2020.
When someone creates a transaction using a Bitcoin, the information from the transaction is sent to the other nodes on the network. This is the same network where there are miners, and it is the miners who are working to solve puzzles using computer power based on verifying those transactions. When one of the miners solves this puzzle before others do, he or she can then publish the new block of transactions to the public blockchain. When this occurs, they will then receive a reward for the work. Currently, the reward is 12.5 Bitcoins. However, when the next Halvening takes place, the reward is going to drop to 6.25 Bitcoins.
Miners need to have a substantial amount of high-quality equipment that can provide them with the computing power needed to perform the calculations needed to solve the puzzles. The goal of the miners is to make sure that their costs for equipment, and for keeping the equipment running, does not become costlier than the rewards they are receiving. If it does, then they are likely to stop mining.
When a Halvening occurs, it means that many of the miners who are currently operating are going to start operating at a loss. During the previous Halvening, there were worries from some that it would be the end of Bitcoin, and that it would no longer be profitable for miners. While there were certainly some who got out of mining, Bitcoin has continued to grow and thrive, and become more valuable. There have been ups and downs along the way, but those who are still mining, and who have a lot of powerful equipment to help them, can still do very well.
This is because even though the number of Bitcoins received may have been cut in half, the value of Bitcoin has risen high enough that many miners did not see much of a difference in what they were being rewarded. Consider the fact that the price of a single Bitcoin in 2012 was around $15. At the time of this writing, a single Bitcoin is worth $8,942.60.
It will be interesting to see what happens with the Bitcoin price in the coming years, as well as what might happen with the Halvening event that’s scheduled to take place in 2020. If it follows suit to previous years, there is a good chance that Bitcoin is going to continue going strong.