Bitcoin Halving Event Reduces Mining Rewards, Impacting Miners More Than Market Prices
As reported by Bloomberg, the much-anticipated Bitcoin halving event recently took place, cutting the mining reward in half. This event, occurring approximately every four years, is aimed at capping the number of Bitcoins in circulation at 21 million, in line with the original cryptocurrency's code. Satoshi Nakamoto, Bitcoin's anonymous creator, introduced the halving mechanism to curb inflation.
The recent halving, the fourth since 2012, reduced miners' daily rewards from 900 to 450 Bitcoins. Despite this reduction, Bitcoin enthusiasts remain optimistic about the cryptocurrency's future. However, analysts observe that the halving was already priced in, resulting in minimal price fluctuations.
With each halving, the impact of Bitcoin mining on the total number of tokens in circulation diminishes. After the first halving, the newly mined tokens accounted for 50% of the total Bitcoins, while in the current cycle, the new supply represents only 3.3%.
The halving event is expected to have a more significant effect on Bitcoin mining companies than on the cryptocurrency's price. Bitcoin mining, which requires substantial energy, involves using specialized computers to validate transactions on the blockchain. Large-scale miners are projected to consolidate, with publicly-traded firms gaining market share due to their access to funding and ability to invest in more efficient equipment.
The next Bitcoin halving is scheduled for 2028, reducing the miner reward to 1.5625 from 3.125 Bitcoins for successfully processing a block of transaction data. Once the 21 million cap is reached, miners will have to depend on transaction fees, which currently constitute a small portion of their total revenue.
