What is the half-life of Bitcoin? Detailed explanation from mechanism to impact: You may also see the term “half-life” when considering investing in Bitcoin. The “half-life” has a big impact on the price of Bitcoin, so you need to understand what it is before you start trading.
This time, I will explain what the half-life of Bitcoin is and the effects of the half-life.
What is the half-life of Bitcoin?
The half-life of Bitcoin is the time when the mining reward (also called mining reward) is halved. It is important to understand the timing of the half-life, as the price of cryptocurrencies is expected to rise before and after the half-life.
Know how Bitcoin works
I will explain the mechanism of Bitcoin, which is necessary to understand the half-life. Bitcoin is one of the crypto assets available on the Internet.
Bitcoin and virtual currencies are decentralized currencies and do not depend on institutions such as countries and banks. If it is a legal tender such as yen or dollar, the state or central bank issues it as currency and guarantees its value. However, Bitcoin has no management organization, and transaction ledgers are also distributed and stored on the Internet.
The part that stores transaction data is called a “block”. And the technology to distribute and store the transaction ledger is called “blockchain”. This is derived from connecting information (blocks) together like a chain. All participants who handle virtual currency share, store, and manage all or part of the ledger.
The advantages of blockchain are as follows.
- Minimal damage caused by hackers
- Difficult to counterfeit
- Automatically execute contract details without human intervention, leading to shortened transaction period and reduced labour costs
- Real-time remittances around the world
The maximum number of Bitcoins that can be issued is 21 million. This is because Bitcoin does not have a management organization, so if it is issued carelessly, there will be too much Bitcoin in the market.
If that happens, the value of Bitcoin will also decline. By the way, since it is built into the program in advance, it is said that it will not be issued beyond the upper limit.
Relationship between mining and half-life
The half-life is the period during which the mining reward is halved as described above. I will explain mining, mining reward, half-life.
Mining originally meant “mining.” Mining in Bitcoin is the act of verifying that a transaction is correctly recorded in the block where the transaction data is stored. It has come to be called mining because the verification method is similar to mineral mining.
The procedure of mining work is
- Data in the block to be verified
- The hash value of the previous block (proof that transaction verification has been completed)
- The numerical value that leads to the correct answer (nonce value)
By putting the in the hash function, you can get the hash value where zeros are lined up first, and it is a mechanism that you can check the validity of the transaction.
To find the correct hash value with zeros at the beginning, it is necessary to enter the nonce candidate value many times, but when it is found, the mining work is completed.
Anyone can participate in mining, but the enormous amount of calculation work is not easy. If there is no merit to participate, there will be no participants, and the mining mechanism itself will not be established.
Therefore, mining rewards were prepared to maintain the mechanism of mining. There is a possibility that you will be rewarded by participating in mining.
Mining rewards are not available to all participants. Only participants who complete the mining work early will be rewarded. Therefore, it is advantageous for those who have introduced a computer with high computing power.
There are people all over the world who are looking for rewards, so some companies are even introducing higher-performance computers. By the way, in the case of Bitcoin mining, the reward is also paid in Bitcoin.
By the way, the mining reward is halved, but the purpose of the half-life is to control the amount of Bitcoin issued. As mentioned earlier, Bitcoin has an issuance limit of 21 million. If there is no half-life, mining will continue to progress and the upper limit may be exceeded.
Inflation can also occur if the amount of mining that exceeds demand is distributed due to excessive mining. Bitcoin has a half-life, which slows the pace of new issuance and prevents inflation.
What is the half-life of Bitcoin so far?
When Bitcoin first appeared, the mining reward was 50 Bitcoin. The first half-life is 25 Bitcoins, and the second half-life is 12.5 Bitcoins, which is exactly halved. And the latest mining reward was 6.25 Bitcoin with a half-life of 2020.
The timing of the half-life is fixed when 210,000 blocks are generated. It takes 10 minutes to generate one block, so 10 minutes x 210,000 blocks = 2.1 million minutes = 35,000 hours = 1,458 days = 3.99543 years, that is, the half-life comes every 4 years.
Therefore, it can be predicted that the half-life of Bitcoin will be 2024 next time, but it cannot be determined because the time may be different.
By looking back on the Bitcoin half-life so far, it can be used as a reference for future half-life measures.
At the time of the first half-life, Bitcoin was not so well known and not many people owned it. Therefore, it seems that there was no noticeable price fluctuation.
Next was the second fluctuation period, but the name recognition increased and the market was booming from the time of the first fluctuation period. Prices have risen and peaked about half a month before their half-life.
It is said that the price started to rise about one and a half months ago due to the second fluctuation. After that, although the price was lowered a little, it rose and became stable.
A similar situation can occur with the ever-increasing half-life of Bitcoin. Whether you want to buy more Bitcoin before the half-life, or if you want to make a profit after the price goes up, you should be aware of price movements for several months before the half-life.
Also, if you decide to buy Bitcoin, we recommend that you buy it early before the price starts to rise. If you’re laid back and the half-life is over, the price can go down.
What is the impact of Bitcoin’s half-life?
The effects that are believed to occur with the half-life of Bitcoin are:
- Price fluctuations around the half-life of Bitcoin
- Withdrawal of small-scale individual miners
Looking at the past half-life, we found that the price of Bitcoin fluctuated significantly around the half-life. In virtual currencies that have a half-life mechanism other than Bitcoin, price fluctuations occur before and after the half-life. It is thought that the price will fluctuate in the same way with the half-life of Bitcoin that will continue in the future.
In addition, mining rewards will decrease steadily due to the half-life of Bitcoin. It is expected that the number of minors (miners/miners) will be significantly reduced by halving the rewards.
The amount of mining rewards reduced by half-life is as large as “half”, which can be quite a burden for small miners. It is also said that the withdrawal of small minors may reduce the market price volatility.
I will also introduce the impact when the half-life of Bitcoin is over and the maximum number of issued coins is reached. The half-life of Bitcoin is up to 33 times. All Bitcoins will be available and will not be issued again.
At that time, the mining work will not disappear as it is, but the reward will disappear. The only profit that the miner can get is the transaction fee (transaction fee) when moving coins. By the way, the half-life of Bitcoin will end around 2140 at the current pace.
Perform virtual currency transactions while anticipating the half-life
I have explained what the half-life of Bitcoin is. If you want to trade cryptocurrencies, it is essential to keep in mind the half-life.
Prices are likely to fluctuate significantly around the half-life, so if you decide to buy it, you should consider buying it early before the half-life. This is because the price will drop after the half-life and you may lose money.
Bitcoin can be traded on all exchanges, but each has its characteristics such as fees and ease of use of the app. It is a good idea to select an exchange after clarifying what kind of transaction you want to make.
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