When you invest in bitcoin or an altcoin, the first thing to understand is where that coin originates. In the case of bitcoin, for example, blocks are “mined.” This means figuring out some extremely complicated and difficult-to-solve math problems. If you solve them, though, the reward is currently 12.5 bitcoin. That amount will be cut in half as time goes on, and it’s all part of the plan.
Bitcoin halving is a tool to keep bitcoin scarce. Remember, bitcoin is designed around the idea of that there are only so many bitcoin, 21 million total in fact, as a method of ensuring bitcoin keeps its value. That means the software underpinning bitcoin was designed to keep control of the supply so that nobody can flood the market. In the case of miners, every four years or so, the reward from mining is halved.
The idea behind this is to maintain bitcoin’s relative stability. In order for the system to work in the first place, it has to be worth it to mine coins as more of them enter circulation. As coins get scarcer, and as we inch closer to the finish line, halving will maintain the value of mining. In theory at least, as more coins are circulated and demand for them rises, mining will continue to be worth it even as the coins you get drop in value. Whether this happens or not remains to be seen; bitcoin is an experiment, after all. To learn more about bitcoin halving and mining, subscribe to the Bitcoin Market Journal newsletter!
[Editors’ Note: This story was corrected on May 16, 2018. Bitcoin mining rewards are 12.5 bitcoin, not 25 as originally stated in the story.]
