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Halving

Halving refers to the process in which the reward for mining new blocks in a blockchain, specifically in cryptocurrencies like Bitcoin, is cut in half. This occurs approximately every four years, or after 210,000 blocks are mined in the Bitcoin network. Halving events reduce the rate at which new coins are created, lowering supply and often leading to price increases due to scarcity. The purpose of halving is to ensure that Bitcoin follows a controlled supply model, with a maximum of 21 million coins to be mined.

Example

In 2020, Bitcoin’s block reward was halved from 12.5 BTC to 6.25 BTC. This event reduced the amount of new Bitcoin entering circulation, contributing to increased demand and higher prices.

Key points

• Reduces the reward for mining cryptocurrency by 50%.

• Occurs approximately every four years in Bitcoin and other cryptocurrencies.

• Aims to control inflation and ensure a finite supply of coins.

Quick Answers to Curious Questions

It controls the supply of Bitcoin, reducing inflation and potentially increasing the value of existing coins due to scarcity.

Halving often leads to price increases due to reduced supply, although the effect can vary based on market conditions and demand.

Miners earn fewer rewards per block mined, which can lead to reduced profitability, especially if operating costs remain constant.
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