By Peter Chawaga
Though it’s a feature that’s been built into Bitcoin since its inception, the third-ever halving of the network’s mining subsidy dominated cryptocurrency headlines this week. Whether viewed as a critical price influencer, a critical feature of decentralized and programmable currency in the face of economic uncertainty or merely a milestone in the early history of the original cryptocurrency, the “Halving” drew international attention.
What Is the “Halving”?
After every 210,000 blocks mined on Bitcoin’s blockchain, Bitcoin’s subsidy gets cut in half. So far, this has occurred in 2012, 2016 and, recently, on May 11, 2020. The mining subsidy is part of the reward that Bitcoin miners receive for their efforts, in addition to the fees that users attach to their bitcoin transactions in order to incentivize miners to include them in the soonest possible block. Following this third Halving, the mining subsidy is now 6.25 BTC.
The Halving subsidy was programmed into Bitcoin by its pseudonymous creator, Satoshi Nakamoto, as a key feature in maintaining the network’s scarcity — a major factor in its perceived value.
The bitcoin supply is hard capped at approximately 21 million bitcoin and without a consensus-approved change to the protocol rules, there can never be any more bitcoin in existence.
“The mechanism by which this hard cap is created is the block subsidy halving,” Bitcoin Magazine explained. “Therefore, these halving events are crucial to the predictable scarcity of bitcoin.”
What Does the “Halving” Mean for BTC Price?
Naturally, a large portion of the attention on Bitcoin’s subsidy halving is directed at the price of BTC relative to fiat currencies. An event so closely tied to the value of bitcoin will undoubtedly influence the way investors view the asset and historical precedent indicates this will move the price, though it’s been hard to predict exactly how.
“The past two halvings led to opposite short-term price movements, according to British bitcoin exchange CoinCorner,” CNBC reported. “Bitcoin climbed 7% one month on from the first halving event in 2012, but slipped 10% a month after the second one in 2016. However, the price rose 944% six months on from the 2012 halving and 38% in the same period in 2016.”
It’s still too early to tell how the Halving will ultimately affect bitcoin’s price, though in the hours directly surrounding the event, the price hovered around the $9,000 mark.
A Holiday for Bitcoiners?
A new phenomenon that arose out of this third-ever halving was the spectacle of the Halving in and of itself. While the past two events largely came and went without much fuss or commotion, this Halving was met with celebrations around the world. Multiple outlets had live streams that garnered hundreds of thousands of eyeballs apiece.
The event was akin to a New Year’s celebration, which was a welcome relief in the middle of a global quarantine. This could be an indicator of a “Bitcoin culture” that is emerging through the same decentralized nature that Bitcoin, itself, arose. If there’s one takeaway from this Halving, it is that Bitcoin is very much alive.
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