Already this spring is expected another halving of bitcoin. About what it is and how it may affect the value of the most popular currency in the commentary UNN told the co-founder of the first in Ukraine fintech ecosystem Concord Fintech Solutions Elena Sosiedka.
Halving is the process of halving the reward for mining new blocks in the bitcoin blockchain, which occurs approximately every four years. It is a mechanism aimed at reducing inflation and managing the total number of bitcoins. While halving is best known in the context of bitcoin, similar mechanisms can be applied to other cryptocurrencies that have limited supply
Halving works on the Proof of Work (PoW) mechanism, which is a mechanism that allows a decentralized network to reach consensus in the absence of a central authority. Such a process has been implemented in several cryptocurrencies, including bitcoin, lightcoin, dogecoin, and monero.
"Halving aims to control inflation by slowing the release of new coins and limiting their total number. In the case of bitcoin, halving occurs every 210,000 blocks, which roughly equates to four years. This process helps stabilize and slow down the generation of new coins, affecting the economics of the cryptocurrency and potentially its value on the market," said Elena Sosiedka.
The next halving for bitcoin is expected around April 2024. During this event, the reward for mining a block will be reduced from the current 6.25 BTC to 3.125 BTC.
"The upcoming bitcoin halving, which will halve the reward for mining, could create a supply shortage and thus increase the bitcoin price. Historically, such events have led to an increase in price," the expert explained, adding that, as with other assets, the balance between supply and demand affects the value of cryptocurrencies.
Besides halving, which changes the balance of supply and demand, according to Elena Sosiedka, other factors also influence the value of digital currencies. Among them are news about regulation or bans in different countries; investment interest in cryptocurrencies can also contribute to price increases; general economic trends such as inflation; changes and updates in blockchain technology.