Bitcoin fork occurred?
Bitcoin is known for its extreme volatility, as it is vulnerable to sudden spikes in its price and rapid declines that could wipe millions of dollars off the value of the currency within a few minutes.
These changes are often mysterious to market watchers, due to the absence of the fundamentals of the digital currency or any links to the real economy.
Another strange feature of âBitcoinâ is that it was part of the software code that created the currency; From time to time, the equation that governs the rate of production of new tokens changes.
As the timing of this event, called halving, approaches again, Bitcoin supporters and skeptics disagree about the impact on the currency's value.
1) Where do new Bitcoins come from?
One of the features that led to the fascination with Bitcoin is the way the cryptocurrency's developer, the pseudonymous Satoshi Nakamoto, linked the production of new currencies to the work required to prevent counterfeiting.
New Bitcoin currencies are produced through so-called mining by people whose computers perform a complex set of calculations to verify the validity of transactions on what is known as the blockchain, a digital ledger similar to a general ledger in accounting. Owners of mining machines compete with each other to win new cryptocurrencies known as a block validation reward.
2) What is the Bitcoin mining reward split?
The process of halving the Bitcoin reward, sometimes called "halving," means a planned reduction in the rewards received by miners (the term used in Bitcoin software).
The process of dividing the Bitcoin reward in half occurs approximately every 4 years - specifically after 210,000 blocks of the Blockchain are mined. As the name indicates, each split cuts the Bitcoins - which each miner receives in exchange for validating the block - in half.
When Bitcoin was launched in 2009, each miner received 50 Bitcoins per block, but that reward decreased to 25 units in the first split in 2012, then to 12.5 units in 2016, and 6.25 units in 2020. It is scheduled to decrease to 3,125 units in 2024.
3) What is the idea behind this process?
Bitcoin is limited in many ways. First, according to its creation protocol, more than 21 million Bitcoins will never be in circulation. This is an attraction for many who fear that paper money - issued by governments - will lose its value due to inflation if it is printed in too much quantity.
Conversely, Bitcoin supporters believe that its value is guaranteed to increase. The process of dividing Bitcoin transactions in exchange for auditing also prevents inflation, by working periodically to slow down the pace of production of new units of the cryptocurrency, in order to avoid exceeding the level of demand.
For other observers, these operations may be a sign to buy the currency quickly, by indicating that a slower pace of growth may be accompanied by a higher price.
4) When will the Bitcoin reward split happen?
The process, which occurs every 4 years, is scheduled to take place approximately in April 2024. The exact date is generally difficult to predict, because the time required to generate new blocks may slow down or accelerate depending on a number of factors.
By most estimates, there will be 64 Bitcoin audit bounty forks before the coin's maximum supply of approximately 21 million units is reached in 2140, and the forking will stop at that point.
Once this happens, no one who mines receives rewards, and they will be expected to rely on charging fees to audit transactions, similar to what credit card companies do.
5) Do Bitcoin reward splits affect the price of the currency?
This is hotly debated. For example, in 2012, the value of Bitcoin rose by about 8,000% in the twelve months following the reduction of rewards, and then rose again by nearly 1,000% following the split that took place in 2016.
As for the last split, which took place in May 2020, it was followed by a buying wave by bulls that ended with a record price for âBitcoinâ reaching about $69,000 in November 2021.
