The global supply of bitcoins is finite, in total 21 million coins may be mined. A coin for the first time sees the light whenever a miner resolves a block.

Bitcoin protocol includes a mechanism to encourage people to be a miner: each time they solve a block, the miner that makes it, receives a financial reward. This reward is currently the main economic incentive that miners have to undermine and receives the name of coinbase. Besides, the coinbase has another function: is the only way that you can generate new bitcoins. In that way, the miner who resolves a block wins an amount of bitcoins newly coined. Currently, the reward for each mined block is 25 bitcoins. However, the halving in bitcoin refers to the reduction to half amount of bitcoins used as a reward of a created block, and according to established protocol every 210,000 mined blocks occurs a halving.

Currently, on average, six blocks are decrypted every hour; therefore, the generation of 210,000 blocks takes approximately 4 years. This means that mining reward will fall to 12.5 BTC in front to 25 BTC in the near halving which is scheduled to occur in June 2016. The final 21 million of bitcoins amount there will be approximately exploited in the 2140.

Unlike the Fiat currencies that can be printed at will by central banks, the total supply of bitcoins is fixed by consensus of the system standards. Because to its nature of deflation, digital currency is often compared with precious metals like gold, which are also undergoing a process of creation or mining which uses many resources. Also the process of mathematically secure transactions in a block of strings called bitcoin mining requires a huge supply of electricity and computing.

Although you might think that the effect be the halving of the bitcoin can be negative, since to reduce by half the reward, the miners don’t want to undermine more bitcoins, really likely to pass otherwise. In fact the halving can result in a favorable environment for the bitcoin, as it has happened previously, this is mainly because to that miners are only still mining if there is a benefit, which means that people have to use and evaluate the digital currency. Therefore, a reduction by half in the block size means that Bitcoin is still relevant, and it has remained relevant by a significant amount of time.

The price of Bitcoin in November 28, 2012, date in which occurred the first halving, was to 12,39 dollars; two months earlier, on September 28, 2012, was exactly the same price; a month later (December 28, 2012) was 13,42 dollars and 6 months later (may 28, 2013) was 129 dollars. A year later, on November 28, 2013, Bitcoin price was 1079,07 dollars. Without a doubt, a risen price of the spectacular Bitcoin. It is impossible to know with certainty if the main cause of this rise was the halving or other events that occurred at that moment, or perhaps a combination of all of them. However, the fact that the price of the Bitcoin reached their highs one year after the first halving supports hopes that this rise will be repeat after the near halving of 2016. Also should be noted that currently the price has remained in almost half of that historical peak, which shows that the relevance of the Bitcoin contrary to what was thought was maintained after the halving of the 2012 and has grown.

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Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.