Bitcoin, the decentralized cryptocurrency created by the pseudonymous Satoshi Nakamoto, has undergone its fourth deflationary evolution, reducing the block reward to 3,125 BTC.
The long-awaited fourth Bitcoin “halving” event has come and gone without fanfare or market reaction. Many participants noted that the change had already been priced in by market makers.
The Bitcoin “halving” is a pre-coded software update that reduces the reward for miners – network operators who play a crucial role by dedicating their processing power to “discovering” new coins. These halving events occur every 210,000 blocks mined, historically equivalent to a halving event every four years.
Talking with The blockThomase Perfumo, head of strategy at cryptocurrency exchange Kraken, explained that this halving was perhaps the “most significant” to date:
“First, after April 2024, nearly 95% of all bitcoin that will ever exist will have been mined. Furthermore, annualized bitcoin supply growth will soon fall to less than 1% for the first time,” Perfumo said.
These changes could lead to underperformance of the network as some players choose to exit the market, as Binance CEO Richard Teng warned:
“The Bitcoin network has shown resilience in the face of such challenges in the past. Advances in mining technology and strategies, as well as potential adjustments in mining difficulties, could mitigate the impact of reduced miner participation,” Teng said. “Additionally, some miners may choose to transition to altcoin mining or explore alternative revenue streams within the crypto space, which could help maintain a balance in the overall mining ecosystem.”
But for those speculating on the cryptocurrency’s future price, halving events are often a time of jubilation. Billionaire Tim Draper explained the reason for his celebration Cointelegraphpredicting that the price could rise up to $250,000.
“The simple reason the price of Bitcoin rises after the halving is that supply decreases, and with continued upward pressure on demand, the price naturally rises in a free market,” he said.
When Nakamoto launched Bitcoin in 2009, the block reward distributed to miners amounted to 50 BTC. The first halving event in 2012 reduced this reward to 25, and subsequent rounds in 2016 and 2020 further reduced this reward to 12.5 and 6.25 respectively.
Bitcoin incorporates a hard limit of 21 million on the total number of coins that can be discovered. With blocks (public ledger components that validate transactions processed during a given period) taking an average of 10 minutes to discover, the network will continue to produce new coins for miners until 2140.
At this point, miners will still profit from their involvement in the bitcoin infrastructure, but they will do so exclusively by collecting fees from end users who exchange bitcoin.