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Mahesh

27/02/24 08:28 AM IST

Bitcoin Halving

In News
  • As athletes train for the 2024 Games in Paris this summer, crypto traders and Bitcoin miners are preparing for what is known as the ‘Bitcoin Halving’—predicted to happen in April.
Bitcoin Halving
  • The Bitcoin Halving refers to the 50% reduction in the reward paid to Bitcoin miners who successfully process other people’s cryptocurrency transactions so that they can be added to the public digital ledger known as the blockchain.
  • In order to “grow” Bitcoin’s blockchain and keep the ecosystem running, Bitcoin miners rely on advanced computer equipment to solve a complex mathematical puzzle through a process known as ‘Proof of work.’
  • This intense activity is the reason Bitcoin transactions result in huge carbon footprints and require vast amount of electricity.
  • No real mining is carried out.
  • The Bitcoin miners with cutting-edge computer equipment, working on an industrial scale, are most likely to solve the puzzle first and claim their prize, which is currently set at 6.25 Bitcoin (BTC).
  • While the reward amount is set, the true value of this prize fluctuates based on BTC prices in the market, and when the owner chooses to sell.
Significance
  • Bitcoin mining increases the supply of BTC in circulation while the Bitcoin Halving reduces the rate at which these coins are released, making the asset more scarce. Scarcity is seen as pushing up prices, as is the case with gold.
  • While there can only ever be 21 million BTC in the world, over 19 million have already been “mined” or released.
  • This sounds like the end of the story, but the Bitcoin Halving means it will take far more time for the remaining coins to be mined.
  • A halving takes place after 2,10,000 blocks are mined, and has happened so far in 2012, 2016, and 2020 - every four years.
  • In 2009, a successful Bitcoin miner could claim a prize of 50 BTC. After this year’s halving, they will only get 3.125 BTC.
  • Both corporate and independent Bitcoin miners are spread across the world, trying to leverage cheap electricity prices in countries like Kazakhstan and Iran to mine as much Bitcoin as they can.
  • China was originally home to many of the world’s crypto miners, but government crackdowns triggered an exodus to other countries.
Source- The Hindu

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