“Half halving” is coming: in mid-May 2020, the supply of bitcoin issued as a mining reward will be halved again. Will this further promote market awareness? Based on what happened last time, this is not completely impossible. Here’s everything you need to know.
When the Bitcoin block reaches a height of 630001 (expected to occur on May 14, 2020), Bitcoin mining rewards will be reduced from 12.5 Bitcoins per block to 6.25 Bitcoins. This will be Bitcoin’s third halving event. Halving events occur approximately every four years or every 210,000 blocks. The first halving in 2012 reduced the block reward from 50 BTC to 25 BTC, and in 2016 it halved it again, from 25 BTC to 12.5 BTC.
The hard-coded consensus rules of the Bitcoin blockchain will continue to cut block reward subsidies in half every four years, until 2140, the last of 21 million Bitcoins will be mined out and put into circulation. As a result, over time, less and less bitcoins are generated each day, which reduces the overall network’s inflation rate.
Bitcoin is issued to mimic the supply and inflation curve of other scarce assets such as gold. But unlike gold, the scarcity of Bitcoin is controlled by globally distributed network nodes (computers that save and verify copies of the blockchain) and miners, who will invest resources to process transactions on the network.
In addition to mining block rewards as a mechanism for the public issuance of new bitcoins, it is also an economic incentive mechanism that provides bitcoin incentives for miners who provide hashing power through dedicated computing hardware and electricity. Each time a halving occurs, the incentive given to miners to find new blocks is cut in half. Today, about 1,800 new bitcoins (worth about $ 11 million) are minted every day, but after the next halving, this number will drop to 900 bitcoins per day.
In the first two halving cycles of Bitcoin, we have seen dramatic fluctuations in the price of Bitcoin and the computing power of various mining pools in the network. Can previous halving events provide some clues as to what might happen in 2020?
Bitcoin halved for the first time on November 28, 2012
Bitcoin’s first halving was successfully completed in the 210,001th block. Back in 2012, Bitcoin was also an emerging digital asset. At that time, Bitcoin’s only major exchange was the now-defunct Mt. Gox, which accounted for about 70% of Bitcoin’s total transaction volume. At that time, the daily transaction volume was only a few million dollars.
In the 12 months before the first halving, Bitcoin transactions were mostly sideways between $ 5 and $ 15. On the day Bitcoin was halved, 10.5 million bitcoins (half of the total number of bitcoins) had already begun public circulation. The price of bitcoin is around $ 12, a drop of more than 60% from its historical high of $ 30 in mid-2011, with a total market value of about $ 200 million.
Back in 2012, a total of 7,200 bitcoins were issued daily at that time, which was worth about $ 86,000 at that time. Given the relatively low economic motivation to mine new bitcoins and the challenges faced by selling them to fiat currencies on exchanges, this market value is not surprising. At that time, Bitcoin’s mining hash rate was only 22Th / s (hash computing power), which is about 5 million times lower than the current mining hashrate of about 100Eh / s per second.
Judging by the current hardware, mining equipment worth less than $ 1,000 will be comparable to the entire network at that time; back to 2012, when most mining was done on the GPU, not the dedicated ASIC hardware used today on.
Bitcoin’s actual price movements rose sharply in the months following the first reduction in block rewards. With the protocol successfully breaking through the first major technical obstacle, people’s confidence in this cryptocurrency seems to make sense. However, the financial crisis in Cyprus has raised concerns about the collapse of the global banking industry in 2008. In March 2013, Bitcoin broke the all-time high of $ 30, surging more than 1500% to $ 200. By the end of 2013, the value of Bitcoin will increase by another 500% to 4 digits, then enter a brutal bear market, and eventually fall to a low of around $ 200 in early 2015.
Therefore, the first halving of Bitcoin is mainly to prove that mathematical principles can be used to create a truly scarce digital asset, and that cutting the mining return in half at one time will not disrupt the economic stability of this token. Sex. After determining that the mathematical rationale behind its scarcity was reasonable, Bitcoin continued to rise over the next few months. In the face of economic uncertainty, traditional currencies seem to be increasingly unstable, and the demand for digital and censorship-resistant safe harbors has driven the growth of Bitcoin.
Bitcoin’s second halving was on July 9, 2016
Bitcoin’s second halving event occurred at block 420,001. By 2016, the Bitcoin ecosystem has become much more mature than it was four years ago. Bitcoin’s daily trading volume has jumped to about $ 75 million, the price has hovered around $ 400, and the market value has reached $ 6 billion. In May 2016, with the launch of BitMEX’s 100x leveraged permanent contract products, high-leverage bitcoin derivative transactions have become popular since then.
In the first months of 2016, Bitcoin’s transaction price was basically flat at around $ 400-450, and then there was a second round of decline. In May of the same year, its price soared 65%, once hitting a high of $ 750, and then fell back to $ 650 when it was halved. However, just a few weeks after the price of Bitcoin halved, the price of Bitcoin fell by 15% to $ 550. It turns out that this is a scam. Bitcoin found a lot of buying support at that price, and it rose by nearly 100%. It fell to a historical high of $ 1,000 at the close of 2016.
Bitcoin’s mining network is also growing rapidly. By 2016, Bitcoin mining has become more and more professional, requiring specialized ASIC hardware, rather than a platform built around a GPU. Since the last halving, the computing power of the entire network has increased by 68,000 times, and a highly competitive network of miners is competing for a share of 3600 bitcoins per day, at the time worth about $ 2.3 million. This is in stark contrast to the mining work dominated by amateurs around 2012. This means that miners are increasingly concerned about maintaining the stability of bitcoin prices to ensure that their investment in hardware and power costs will pay off.
With Bitcoin’s first halving going smoothly, traders can better prepare for the halving in 2016-creating perfect conditions for selling before and after halving. However, from a more macro perspective, the hash rate of Bitcoin is obviously bullish, so in the months after the second reduction in mining rewards, the price of Bitcoin once again surpassed its previous historical high, which is not enough Curious.
Bitcoin’s third halving will happen in May 2020
After the bull market in 2017, the price of bitcoin and mining hashrate in 2018 were all the way. After its mining power of the entire network reached 65 EH / s and the price stabilized at a high point of 6,000 US dollars, in December last year, prices and computing power began to fall sharply, reaching 3,000 US dollars and 35 EH / s respectively. Since then, the price of Bitcoin and the mining power of the entire network have begun to rebound, soaring to $ 14,000 and the entire network computing power of 110 EH / s; to a certain extent, the maturity of the blockchain market has promoted this technology China has embraced this technology, and Facebook is trying to launch its own cryptocurrency project, Libra.
By half of 2020, 18.375 million Bitcoins (87.5% of all Bitcoins) will be mined and circulated. In the next 120 years, only 12.5% of Bitcoins remain available for mining. Crucially, in the next half of the year, Bitcoin’s annual inflation rate will fall from the current 4% or so to 2%. This will mean that for the first time, the annual inflation rate of Bitcoin will be lower than that of many fiat currencies controlled by central banks around the world. After Bitcoin cuts, this may not have much direct impact on prices. But with inflation rates lower than those of other competing currencies, the claim that bitcoin miners are somewhat similar to central bank money printers is increasingly untenable.
Bitcoin has a historical precedent. Its value will appreciate as it enters and exits the halving cycle, of course, considering that there will be some large fluctuations in it. If the bull market in which the mining power of the entire network continues to increase continues in 2020, then this history will repeat itself in “halving” in 2020. See you next year …