One of the hottest topics in the crypto world today is the Bitcoin halving. If you're scratching your head wondering what on earth that means, don't worry – you're not alone. Let's break it down in simple terms.

What is Bitcoin in the first place?

Bitcoin is a cryptocurrency (also known as virtual currency or digital currency). It is one of thousands of cryptocurrencies but what makes it special is that it was the first one and till this day is the biggest one. It was created in 2009 by a mysterious anonymous person or a group of people using the pseudonym Satoshi Nakamoto.

Bitcoin, like all cryptocurrencies, operates on a blockchain which is essentially a distributed ledger. It’s basically a peer-to-peer network that removes the need for a central authority or intermediary to approve issuing new coins, recording transactions, keeping track of balances, etc. All transactions are recorded online and can be seen by everyone. This is the polar opposite of traditional currencies like dollars or euros that are governed and controlled by a central authority or a government, and all transaction details are hidden.

Bitcoin's journey toward becoming a store of value, medium of exchange, and unit of account reflects its transformative role in finance. Evolving from a digital currency to a trusted wealth holder, Bitcoin enables an increasing volume of global transactions. Its versatility underscores its importance in the digital age.

How is Bitcoin created? What is Bitcoin mining?

Bitcoin supply is limited - there will only ever be 21 million coins. This is another difference from traditional currencies - while governments can create more dollars or euros, the supply schedule of Bitcoin is fixed.

These 21 million coins are not immediately available but work needs to be done to get them. It was programmed like this to manage the supply, making sure not everything is pushed to the market at once.

So to access them someone has to “mine” new Bitcoins. Mining is a process where people use powerful computers to solve complex mathematical puzzles. Solving these puzzles results in Bitcoin transactions getting processed on the network. As a reward for their efforts, miners are awarded new coins. Every so often (about every four years), the number of bitcoins that miners get for solving those math problems gets cut in half. This is the halving.

What’s the Bitcoin halving? What is the impact of it? Why is it such big news?

Historically, the price of Bitcoin has performed well during the year after the halving event. When the supply of new coins decreases, but demand stays the same (or even increases as more people are getting interested), basic economics tells us that the price tends to go up. It's all about supply and demand. Nothing is ever certain however. It’s important to keep in mind that past performance isn’t always indicative of future results.

While humans count time in seconds, hours and years, then the Bitcoin system does it in blocks. While humans expect the bitcoin halving to take place every four years, then Bitcoin itself expects this to happen every 210,000 blocks. 

Initially a miner got 50 coins per every block they mined. The first halving event in 2012 reduced the reward to 25 coins. Subsequent halvings in 2016 and 2020 further slashed the reward to 12.5 coins and 6.25 coins. From April 19th 2024 the reward will be just 3.125 coins per block - 16 times less than in the beginning. It is expected to reach 0 some time around 2140 by which time no new bitcoin will reach the market.

Here’s an analogy with cars. Let’s say you really love Mercedes cars and you are not the only one. The company promised they will only create 100 cars ever - a fixed limited supply. Today they will release 50 cars for people to buy. 4 years from now another 25 will be put to the market. In 8 years another 12.5 and in 12 years just 6.25 until one day no more new Mercedes’ will be ever made. The cars will increase in value over time as there is only so many you can get your hands on and the fewer new ones out, the more people are ready to pay for the car for both the old and the new ones.

During the Bitcoin halving, the number of new bitcoins awarded to miners is reduced by half. Since the supply of new bitcoins decreases, and demand typically remains constant or increases, some people believe this scarcity can cause the price to rise over time. However, it's important to remember that the cryptocurrency market is complex and influenced by many factors, so predicting price movements isn't guaranteed.

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You can easily buy Bitcoin with the Change app across Europe. Download the app and start now. 
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Happy halving!

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