What Is Halving? What Does Bitcoin Halving For? What Is the Purpose of Halving?

What Is Halving? What Does Bitcoin Halving For? What Is The Purpose Of Halving?

Nowadays, the use of cryptocurrencies has gradually increased. Cryptocurrencies have a certain supply, just like other currencies used for trading.

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Bitcoin, the pioneer of cryptocurrencies, has pioneered a standard in this regard. This is the halving process called "Bitcoin Halving".

What Does Halving Mean?

Halving refers to the process that reduces the issuance rate of a new cryptocurrency. In other words, in cryptocurrencies, halving is the periodic regular reduction of the block subsidy provided to miners. This process allows a cryptocurrency to maintain a constant issuance rate until it reaches its planned maximum supply.

Block halving refers to reducing the rate at which a new cryptocurrency is created.

In particular, periodic halving events are used, where the block rewards earned by miners are reduced.

Halvings can predict that cryptocurrencies will be distributed to the market at a constant rate. Halving is a key element of the cryptocurrency economic model as it guarantees that a rate of reduction will be demonstrated. This control of the material inflation rate is one of the key differences between cryptocurrencies and traditional fiat assets, which have essentially unlimited supply.

What Is the Meaning of Halving?

It is the process of periodically halving the reward per block in cryptocurrencies produced by miners.

What Is the Relationship Between Halving and Mining?

Halving is used in mining activities related to the production of cryptocurrencies, as well as for the approval of transfers on the blockchain network. The end of the mining process or the slowdown of operations affects the availability of the system. The total number of cryptocurrencies produced by mining is determined. No cryptocurrencies are produced more than this set amount. In this way, the supply and demand balance, which is the main factor in the pricing of the cryptocurrency, is maintained. At the same time, a certain degree of inflation is prevented in this way.

How Does Halving Happen?

Halving in cryptocurrencies occurs when two blockchain networks are formed with changes made to the code of any blockchain network. These changes may not be accepted by some of the miners or users on the network. Therefore, two different blockchain networks are created. With the fork of the two versions, two different cryptocurrencies are created between these new networks. For instance, Bitcoin Cash was created as a result of a halving on the Bitcoin blockchain network.

Halving is a method of reducing the amount of rewards for mining cryptocurrencies, making it increasingly difficult for miners to earn rewards. Halving also increases energy savings on the blockchain network.

Mining operations may decrease as rewards decrease and become more difficult.

What Changes When Halving Happens?

When a halving occurs on a blockchain network, some changes may occur. These changes include the following:

The number of cryptocurrencies that miners can earn as rewards is halved.
It becomes harder to earn rewards.
Mining activity may decrease as it becomes harder to earn rewards.
Supply decreases.
The price of a cryptocurrency may increase after reduced supply.
Mining may become less profitable.
Miners may quit as a result of reduced profits.

Which Cryptocurrencies Have Been Halved? What Is Bitcoin Halving?

Here are some popular cryptocurrencies that have been halved:

Bitcoin
Litecoin
Bitcoin Cash
Bitcoin SV

These and many other similar cryptocurrencies use halving. The block reward of these cryptocurrencies is halved periodically.

Bitcoin experienced its first halving in 2012. With this halving, Bitcoin's block reward of 50 BTC was reduced to 25 BTC. The second Bitcoin halving took place in 2016. The block reward was reduced from 25 BTC to 12.5 BTC. The third halving took place in 2020. The block reward was reduced from 12.5 BTC to 6.25 BTC. Bitcoin halving is repeated every 4 years. The maximum supply of Bitcoin is set at 21 million. As of 2021, the supply reached was 18 million. According to this calculation, Bitcoin will reach its maximum supply in 2140.

Litecoin has also followed a path like Bitcoin for the halving process. For instance, Litecoin experienced its first halving in 2012. The block reward was reduced from 50 LTC to 25 LTC. The second Litecoin halving took place in 2019.