Bitcoin halving event could see

Bitcoin users are looking forward to a one-in-every-four-year event where the digital token’s new supply is essentially cut in half, which in the past has caused its value to skyrocket.

Known as a bitcoin halving, like the Olympics, it occurs every four years and is used as a way to keep the digital coin valuable and still in high demand without overpopulating the market with it.

Although the supply of existing bitcoin isn’t actually halved, the future supply is made a lot harder to access.

How it works is that crypto miners receive half as many incentives to mine the digital currency, thereby reducing its new supply.

Bitcoin’s first “halving” occurred in November 2012, and its fourth halving is set to occur later this week, on April 20.

In the past, the halving event has led to a mass surge in bitcoin’s value. Basic economics indicates that once the coin became less abundant, demand outstripped supply, leading to a price jump.

However, some experts have warned that it might not happen this time around.

Some experts think that it’s unlikely the coin’s value will go up by as much as it has in the past, given that it already hit a new all-time high just last month.

Billionaire Arthur Hayes doesn’t think the price will rally, and instead warned it could even be negative after the halving event, according to Crypto Potato.

Crypto trade press publication Coinbase has also said it will be a challenge for the coin to garner “upward momentum”.

However, the vast majority of experts think a rally is impending.

Bitcoin was created in 2008 by a person or group writing under the pseudonym Satoshi Nakamoto as a peer-to-peer decentralised electronic cash system.

The digital token is traded via a decentralised registry system known as a blockchain. The system requires massive computer processing power in order to manage and implement transactions.

That power is provided by miners, who do so in the hope they will receive new bitcoins for validating transaction data.

The system poses a complex computer puzzle to decide which miner wins the privilege to validate the block and thus receive the reward.

“To understand halving, it is important to remember the role of miners, who are basically responsible for the bitcoin network security,” ThinkMarkets analyst Fawad Razaqzada told AFP ahead of the last halving, in 2020.

“Each time a block of bitcoin transaction takes place, they need to be verified by miners. The miner that verifies each block gets a reward for its work with more, newly created, bitcoins.”

Commercial mining operations often occupy huge hangers or warehouses, and consume large amounts of electricity to power and cool the computers, which is a considerable cost in addition to equipment.

“Halving will impact profitability of mining bitcoin because work and resources will need to double in order to achieve the same reward as before,” added Mr Razaqzada.

“However, if the value of bitcoin appreciates significantly then this will offset some of the costs.”

Many miners have reportedly been preparing for months for the upcoming “halving”.

They have done so by stockpiling bitcoin and upgrading their equipment so that they can still keep mining at a similar level to what they are now, even after the halving.