Bitcoin Halving | Explained | RYZE | Bitcoin News | Guides and Investment

1. Bitcoin Halving | Explained | RYZE | Bitcoin News | Guides and Investment The third Bitcoin halving is set to occur between May 14 and May 18, 2020, and everyone is talking about it. Don’t know what this means or why it’s important? Not to worry, Ryze has you covered. What is the Bitcoin Halving? The halving is a preprogrammed functionality of supply in the Bitcoin protocol that reduces the block reward by 50%. The Bitcoin protocol is the set of rules that govern the Bitcoin network, and the block reward is the amount of Bitcoin that is created every 10 minutes. The halving occurs roughly every 4 years (every 210,000 blocks to be precise). The Bitcoin network programmatically decreases how much new Bitcoin is “minted,” reducing its rate of supply. Confused about blocks, Bitcoin, and blockchain? Here’s a quick refresher. An important aspect of the halving is that it is predictable, nearly down to the date. This results in bullish market hype around the event, set for May of this year. Bitcoin’s production is on a predetermined schedule, as the network self-balances to

2. adjust for higher or lower transaction volume. Halvings cut Bitcoin’s inflation rate in half, and are built-in to ensure that new Bitcoin is created at a slower rate over time. Mining and Block Rewards: The block reward incentivizes people to validate transactions by mining Bitcoin. Bitcoin mining discovers the hash to validate the next block of transactions on the Bitcoin network. Think of the hash as the answer to a complicated math problem. Miners put in computational power and use specialized computers known as “mining rigs” to discover the hash. The first miner to discover the hash gets the reward. A deeper dive into mining reveals that it’s not as simple as described above. I’ll provide an in-depth article about the intricacies of Bitcoin mining in the future, but if you understand the points above, you will be able to understand why the halving is important. The key takeaway is that the halving reduces the rate of supply for Bitcoin. It cuts the amount of Bitcoin produced every 10 minutes in half. Bitcoin Halving’s Impact on Scarcity You might be wondering—“why should I care and what does this have to do with the price?” To answer this question, we need to examine Bitcoin’s monetary policy and understand why it is a scarce resource. Bitcoin is scarce for two reasons: its supply is finite, and the rate of supply decreases over time. Let’s consider the words of cryptography pioneer Nick Szabo: This means that things that are hard to create, and whose creation can’t be faked, have value. Bitcoin, like gold and other precious metals, has both of these properties. Mining Bitcoin requires large amounts of electricity and computational power. In fact, the Bitcoin network uses a similar amount of energy every year as the entire country of Venezuela. Finite Supply and Scarcity: Think of Bitcoin as digital gold. Mining either asset produces more of the asset, and in the case of Bitcoin, newly minted Bitcoin is given to miners as a block reward. Like gold, Bitcoin has a fixed supply. Only 21 Million Bitcoin will ever exist.Bitcoin’s fixed supply is one of the reasons it has value. Resources with a low supply are intrinsically valuable simply because they are hard to obtain. The scarcity principle of economics dictates that a low or fixed supply and increasing demand results in an increase in price over time. Bitcoin’s Rate of Supply & Stock-to-Flow: A second factor contributing to Bitcoin’s scarcity is its decreasing rate of supply. Since the block reward is halved every 4 years, the amount of new Bitcoin that gets created decreases over time.

3. Before the first halving, the reward was 50 Bitcoin per block. In 2012, this was reduced to 25 Bitcoin. In 2016, it was reduced again to 12.5 Bitcoin. In May 2020, the block reward will be reduced to 6.25 Bitcoin.