Here’s what to know about the halving.
How does the halving work?
A key purpose of Bitcoin is to enable people to exchange money without any sort of intermediary, like a bank, verifying the transaction.
In place of a bank, a distributed network of computers scattered around the world, all running Bitcoin’s software, performs the verification. To confirm a transaction, the computers solve complicated puzzles, racing one another to guess the answer. This process is designed to ensure that Person A has sufficient funds to send money to Person B.
As a reward for the verification service, the people running the computers — which require huge quantities of energy — receive rewards in the form of new Bitcoin. Each halving reduces the size of that reward by half (the current prize is 6.25 Bitcoin).
What’s the point of the halving?
Since Bitcoin’s creation in 2008, investors have also envisioned it as a hedge against inflation.
In a traditional financial system, governments can start printing more money when they think that the economy would benefit from doing so, sometimes causing inflation. Many crypto advocates are skeptical of that practice.
Bitcoin’s halvings are programmed to ensure that the total number of coins that will ever enter circulation is capped at 21 million. As the amount of Bitcoin in the world approaches the cap, the size of the reward for verifying transactions will become increasingly smaller, gradually approaching zero. That fixed supply, crypto proponents argue, should protect Bitcoin’s value in the long run.
This news is republished from another source.
