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A Monumental Bitcoin Moment is Happening on May 13th.

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But like any currency, Bitcoin is prone to issues. Because Bitcoin can, in a sense, be pulled out of thin air when rewards are given for mining, every day more and more Bitcoin are released in circulation. Anyone knows that as more currency is released, the less valuable it is.

The larger the value of Bitcoin, the less the number of Bitcoin in circulation can be to make the equation equal, and the larger the number of Bitcoin in circulation, the smaller the value of Bitcoin must be to make the equation true.

To account for this, Bitcoin cuts the reward given to miners for processing a transaction in half every four years. This cuts the rate at which new Bitcoin is released into circulation in half. This is Bitcoin’s synthetic form of slowly decreasing inflation until all the Bitcoin is released and in circulation. At this point, because the rewards for mining will be nil, Bitcoin plans to reward miners with fees network users will pay.

This halving is another step in Bitcoin’s rapidly decelerating supply. There are only going to be twenty-one million Bitcoins, and there are only 2.5 million Bitcoins waiting to be released. The rest are already in circulation.

In 2009, the reward for each chain mined was 50 Bitcoins (can you imagine that?). After the initial halving, the reward was 25, and after the second, 12.5 Bitcoins. On May 13th, the reward will be 6.25 Bitcoins.

The halving process ensures that new Bitcoin will be released until around 2140, but also means that the remaining Bitcoin will become more valuable as new currency added begins to taper off. Bitcoin’s scarcity will begin to move closer and closer to assets like gold.

Yet Bitcoin has one crucial difference with precious metals like gold and silver that owes to Bitcoin’s artificial nature. While we assume that there is a limited amount of precious metals on the planet (which could be broken with Elon Musk’s ventures into mining in space), there isn’t really a fixed rate. That open ceiling means that gold remains relatively stable, but Bitcoin has a very public and controlled limit of 21 million. This means that over time, its controlled inflation will drop past that of gold until it is equal to 0, and its scarcity will shoot through the roof of anything worth value.

Currently, Bitcoin’s inflation rate in 3.65%. After the halving, this will be cut in half to 1.825%. Gold’s inflation rate is about 1.6%. We can expect for Bitcoin to drop below gold in inflation rate soon.

Historically, Bitcoin halvings have been followed with massive surges in Bitcoin’s price. The first halving in November of 2012 saw an increase of nearly $1,000.

The second Bitcoin halving on July 9th, 2016 soared nearly $20,000 dollars, and then fell over the course of a year from the peak down to $3,200, still higher than the pre-halving price of $650.

There’s only been two halvings so far in Bitcoin history, but it’s not unreasonable to suspect something similar will happen with Bitcoin’s third halving.

  • Bitcoin’s artificial system allows it to control, to a limited degree, the price of Bitcoin.

Source: https://medium.com/swlh/a-monumental-bitcoin-moment-is-happening-on-may-13th-af9907fe8de7?source=rss——-8—————–cryptocurrency

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