STEEMCRYPTOCHALLENGE #5 - I LOVE BITCOIN : BITCOIN HALVING - HOW IT AFFECTED MINERS AND MORE
Introduction
Bitcoin and its blockchain are basically collection of computer all around the world having bitcoin's code downloaded and installed in them. This means that all the computer have the capability of viewing all bitcoin transactions in them. Bitcoin blockchain is a very transparent platform and no one can make a transaction without everyone entirely seeing it. To completely understand bitcoin halvining, lets explain whats bitcoin mining.
The mining process
Bitcoin mining is simply a process where people use their computers to participate in bitcoin's blockchain network as a transaction processor. Miners utilizes a system called proof of work, which means that miners must prove their effort in processing transaction so they can be rewarded. Their effort is defined by the time and energy spent in running the hardware and ability to solve complex problems. Work is done in extracting bitcoin from the code, the same way that physical gold is drawn out of the earth.
Bitcoin miners solve mathematical problems and confirm the legitimacy of a transaction. They then add these transactions to a block and create chains of these blocks of transactions, forming the blockchain. The term mining is not used in a exact sense but used as a orientation to the way precious metals are gathered. Bitcoin miners solve mathematical problems and confirm the legitimacy of a transaction.
The bitcoin halving
Every 210,000 blocks mined, or about every four years, the reward given to Bitcoin miners for processing transactions is cut in half. the cut in half of reduces the way bitcoin is release in the system. It is a system use to tackle inflation thereby causing scarcity as well as the price. Good new - Scarcity enhances value. research describes s the hope of bitcoin to maintaining its ascending increase in price as it poses a significant aspect of the bitcoin blockchain. This system of halving will continue till 2140.
The first halving which occurred in November 2012, saw an increase from $12 to nearly $1000 . The second that occurred in July 2016 saw the price rising from $600 to almost $20000. The next halving happened on 11th may 2020 with the price increasing significantly. next halving would be in 2024.
how does it affect miners
Miners upon a successful halving, miners are given incentives for processing network that users will pay. the fees ensure the miners keep the network active.
In the event where halving does not increase demand and supply, the miners do not get any incentive as a reward for completing transactions would be smaller and he price of bitcoin not high enough. in order to prevent this, bitcoin has a design process to change the difficulty of mining transaction it takes to get mining rewards and incentives.
Conclusion
The continuity of bitcoin are also dependent on the miners and the system makes provision for their incentives at anytime any halving is conducted to ensure the system optimal performance.
Thank you for taking out time to go through.