What is Bitcoin Halving
Bitcoin halving refers to the 50% reduction in the reward paid to Bitcoin miners who successfully process other people’s cryptocurrency transactions so that they can be added to the public digital ledger known as the blockchain.
In order to “grow” Bitcoin’s blockchain and keep the ecosystem running, Bitcoin miners rely on advanced computer equipment to solve a complex mathematical puzzle through a process known as ‘Proof of work.’
This intense activity is the reason Bitcoin transactions result in huge carbon footprints and require vast amount of electricity.
No real mining is carried out.
The Bitcoin miners with cutting-edge computer equipment, working on an industrial scale, are most likely to solve the puzzle first and claim their prize, which is currently set at 6.25 Bitcoin (BTC).
While the reward amount is set, the true value of this prize fluctuates based on BTC prices in the market, and when the owner chooses to sell.
Think of a group of grocery store cashiers who are in a contest to each bill the same set of items, with the person doing it first (and accurately) getting a prize of ten gold coins at the end.
The cashiers can use their favourite tools in order to bill the items and process the payment.
While one might prefer to tally up the total with paper and pencil, another might decide to use their smartphone calculator, while someone else buys a state-of-the art computer system attached to a price scanner.
The person most likely to win in this case is the cashier with the most advanced equipment, but the others stand a chance of winning as well.
This is largely a positive system for everyone: the customers’ items are efficiently billed and all the cashiers do their job well because they want to claim the prize.
That depends on the price of gold in the market, and the cost of the equipment that the cashiers bought in order to win the gold coins.
This is one way to understand Bitcoin halving.
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