There is something important that is going to happen in the bitcoin world next year. The cryptocurrency will see the third ‘halvening’ probably in May 2020, a process repeated approximately every 4 years. This is said to be done in an attempt to ‘create predictable scarcity’ of bitcoin.
One of bitcoin’s key features is that it is ‘hard-capped’ at 21 million. There will be no more than this number of bitcoin ever. In terms of calculations, the exact number of bitcoin that will be there is 20,999,999.9796 and nothing more. This hard-capping is achieved by the process of halvening, which is crucial for the very existence of bitcoin. Halvening is explained as a process when Bitcoin’s block subsidy gets cut in half. Halvening is programmed to continue to occur every 210,000 blocks until the block subsidy reaches 1 satoshi, the smallest unit of bitcoin at 0.00000001 BTC. At that point, the next block subsidy will simply drop to zero, and miners will only collect transaction fees. The Bitcoin ecosystem is about rewarding miners and if a miner successfully solves a block on Bitcoin’s blockchain, it will generate for itself a predetermined amount of bitcoin as a reward for confirming new transactions. This amount is called a ‘block reward’ and the amount is determined by taking the original block subsidy, 50 BTC, plus fees. The subsidy cuts in half every 210,000 blocks until the miner gets to the block he just mined. So blocks 1 through 210,000 had a subsidy of 50 BTC, blocks 210,001 through 420,000 had a subsidy of 25 BTC, blocks 420,001 through 630,000 have a subsidy of 12.5 BTC and so on.
The earlier Bitcoin halvenings happened on 21 November 2012 and on 9 July 2016. The halvening events are extremely important for bitcoin’s price. It is estimated that there are over 17 million bitcoin mined so far. At every halvening the supply of new coins entering the market is drastically reduced. Historically, this has led to the price of bitcoin increasing. In previous halvening instances, bitcoin had seen bull activity.
Bitcoin is now priced around $11,000 a unit, after an eventful past year when there was a price drop of 70% from a record high of $20,000 in late 2017. Typically, immediately preceding the halvenings in the past, the price has increased 300% and crypto experts predict this is bound to happen this time as well and the price may ultimately touch $200,000 by 2021. A great investment option indeed!
