Halving is a process that reduces the amount of new cryptocurrency entering circulation. This occurs when a certain number of blocks have been mined or created, and it serves to reduce the rate at which new coins are generated. The halving event is programmed into the successions of blocks within blockchain technology and is typically implemented as part of an inflation control measure for certain cryptocurrencies such as Bitcoin (BTC).
When this event takes place, miners’ rewards for successfully mining a block get cut in half. For example, prior to the most recent Bitcoin Halving Event on May 11th 2020, miners were rewarded with 12.5 BTC per block they mined; after the Halving occurred this reward was reduced to 6.25 BTC per block mined going forward.
This reduction in supply often brings increased demand due to basic economic principles – if there is less supply and more demand then prices tend to increase over time as buyers compete for fewer available units within their respective markets. As such, many investors expect that previous post-halving events will occur again and anticipate price increases in anticipation thereof; however no one can predict what will happen with any certainty as crypto markets are notoriously volatile!
Overall halvings serve two main purposes: firstly, by reducing miner rewards it helps extend the life cycle of any given cryptocurrency by preventing too much currency from entering circulation at once thus maintaining its long-term value; secondly by creating anticipation around potential price appreciation these events can become important catalysts for driving investment interest amongst speculators who may be looking for opportunities within crypto markets.
