As a member of the global Bitcoin community, you may have heard of the term “halving”, and wondered what Bitcoin Halving is all about. Fear not, because we have created an infographic to make sure all of you (and all your friends) understand it!
What is Bitcoin?
Bitcoin is a digital asset designed to be an alternative to fiat currencies issued by national banks. It was born in 2009, created by a mysterious character who called himself Satoshi Nakamoto.
Bitcoin differs from traditional currencies and settlement methods. It is decentralized, transparent and non-repudiable. To do this, it relies on record of transactions called the blockchain, and strong cryptographic functions.
How are bitcoins produced?
Bitcoins are produced through “mining”. This is the process of verifying transactions on the blockchain.
The blockchain contains the history of transactions, linked in units called a “block”. Each block contains roughly 10 minutes worth of transactions. The blockchain is updated with new transactions by nodes, and anyone can set up a node. A person who owns a node and updates the blockchain is known as a “miner”.
To verify the transactions in a block, nodes solve a difficult cryptographic problem called the “Proof of Work“. The newly verified block is added to the blockchain only when the Proof-of-Work is done and the solution is agreed by the rest of the nodes.
The successful miner of the block receives the block reward as an incentive to continue mining.
What is Bitcoin Halving?
Bitcoin Halving is a process that happens once every 4 years. The first Halving happened on 28th November 2012, which reduced the block reward from 50 to 25 bitcoins. For the next Halving, which is expected to occur at around 9 July 2016 UTC 22:00, the block reward will be halved to 12.5 bitcoins.
What are the consequences of Halving?
Bitcoin Halving will half the revenue that Bitcoin miners earn. This lowers their profits and decreases their incentive to continue mining. Many have feared that this may result in a lower hash rate, and dramatically increase the time taken to mine each block. This disturbs the network’s payment and settlement functionality.
Some people think that the reduced production of bitcoins and the increasing demand of bitcoin will drive prices up. Others think that the prices have already accounted for the Halving event, and there will not be major swings as a result of the Halving.
Read our Infographic to learn more: