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Today, let’s talk more about Bitcoin Halving: Why it was likely made part of Bitcoin, and if it is a good thing. But listen to our previous episode first for an explanation of halving.
Now we know that Halving is necessary because there can only ever be 21 million bitcoins. All currently unmined Bitcoins go to miners as rewards and they would be gone quickly if those rewards didn’t get cut in half every so often.
But why is there a hard limit on the amount of Bitcoins in the first place? We can’t know for certain, but it looks to be a response to the 2008 financial crisis. Governments print their own money as they see fit, and did so heavily back then, causing inflation. Bitcoin is designed to be the opposite, with money getting created at decreasing speeds thanks to Halving.
So, is Halving a good thing then? Depends on who you ask.
Now, for those people who hold Bitcoins, Halving means that less newly mined Bitcoins are coming into circulation over a certain period of time, and lower supply generally means higher prices. And in fact, anticipation of Halving has driven up Bitcoin prices a ton whenever it happened in the past.
But consider things from a miner’s perspective - suddenly you get half the rewards for the same amount of power used and hardware operated. That will only make sense, if the price increase of your Bitcoin rewards makes up for it.
But maybe that’s actually a good thing, forcing everyone to use more energy efficient-ways to mine. We can only hope!
And next time: Do other blockchains also use Halving?
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