Business

What it is and what it means

So far there have been two “halving”; Today, May 11th, the third happens.

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What it is and what it means
What it is and what it means

This story originally appeared on high level

By Guillermo Barba

This article explains in a simple way what the “cut in halfFrom Bitcoin It happens on the same Monday, May 11th, and has resulted in the price trend continuing for a few months.

First of all, it is important to understand what Bitcoin (BTC) is and why it is different from normal e-money.

When you and I transfer money, we first transfer funds from one bank account to another. The intermediary is the bank or banks involved in the operation.

This does not happen with cryptocurrencies because the money (virtually) goes from “hand to hand” as if it were cash. The registration, which ensures that this money is not duplicated, but only held by the last and legitimate holder, is the “blockchain” (blockchain, in English).in which the movements performed are simultaneously based on thousands of computers around the world. Banks are therefore not required in this system.

Those responsible for establishing the chain of Blocks are active nodes called “miners”.

Miners work to solve mathematical operations and confirm transactions that they are rewarded for doing – proportional to the work done – at the end of each block or link in the chain (Blockchain), with bitcoins.

Every four years, or more precisely, every 210,000 “mined” blocks, a phenomenon known as “cut in halfThis is nothing more than halving the reward or payment that the “miners” receive.

Bitcoin was born in 2009, so two halves have occurred so far: after the firstthe reward from 50 to 25 BTC; after the second, it fell from 25 to 12.5 BTC and will only reach 6.25 BTC on May 11.

Of course, Bitcoin’s original design is designed to grow its “money supply” in a previously known, progressive but increasingly slow manner. The last mined block is expected to arrive in 2140when there are no more new bitcoins when it reaches its limit of 21 million BTC.

At the time of writing this article, the money supply was already 18.37 million BTC, which means that around 87.5 percent of all Bitcoin products have already been “mined”, and this number is growing – albeit at a slower rate due to “halving.” “-.

Despite the above, the reality is that every time there is a “halving” historically, in the months or weeks before, there is a positive (merely speculative) mood among investors and the media that prices start as there is has fallen sharply since then.

Therefore I present the most important points to understand it:

  1. It is FALSE that “Halving” causes a “greater shortage” of Bitcoin as the money supply in this cryptocurrency continues to growand will at least remain so until it reaches its peak of 21 million BTC by 2140;
  • The value of Bitcoin is NOT based on the fact that more or fewer Bitcoins are in circulation, but the greater or lesser public demand for cryptocurrency, regardless of the money supply and its growth rate.
  • The halving is not a guarantee that the price will continue to rise.
  • Experiences made before and after the previous halving are not used to predict a predetermined behavior of the price in the future.

If we are always able to observe the points mentioned abovewe will be able to stay out of the cyclical speculations that occur around the “halving”. As you can see, from a fundamental point of view, this is much less important than some analysts expect from us.

Bitcoin was designed as a cryptocurrency for global e-commerce, but so far it is an experiment that is not known whether it will be successful.

Due to its extreme price volatility, it is still not suitable for everyday use, but useful for those who like to speculate with this asset class. Please don’t do it without the necessary knowledge and advice, But get used to these new financial technologieswho are here to stay.

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