Bitcoin

CRYPTO ENCYCLOPEDIA

What is the current Bitcoin price?

What is Bitcoin and why does it matter?

For Bitcoin to work, independent participants had to join the network and provide computing resources to confirm transactions and protect the network from alteration. These individuals called miners have also been provided with an incentive to participate - each mined block of transactions gave 50 BTC as a reward.

Long story short, Bitcoin became the very first functional network that utilizes blockchain technology, and the first deflationary cryptocurrency built on the principles of decentralization, transparency and immutability.

Up to this day, Bitcoin remains an open, censorship-resistant and cryptographically secured network, gaining appreciation as a medium of exchange, store of value, and hedge against inflation of fiat currencies.

As Bitcoin started to gain more and more traction, its open-source technology was used to create entirely new cryptocurrencies for different purposes. At this time, there’s now an estimate of 7,000 different cryptocurrencies, also called altcoins, with Ethereum, Litecoin, Tether and XRP being the most prominent ones by market capitalization besides Bitcoin.

What is Bitcoin mining?

The Bitcoin network would not exist without the participation of miners. Miners are participants of the network that dedicate their hardware’s processing power to confirm transactions in so-called blocks. For this activity, miners get rewarded with newly minted bitcoins and transaction fees of transactions they help confirm.

This process ensures that the network’s immutability is achieved by miners competing in solving computationally difficult tasks. To reverse a recently confirmed transaction, an attacker would have to perform more calculations than the rest of the network combined.

The mining difficulty adjusts according to the mining power every two weeks. This ensures that regardless of how many miners join or leave the network, the amount of newly created bitcoins remains the same.

Every four years, the Bitcoin blockchain undergoes a halving process, which halves the mining rewards and slows down the issuing of new coins into the total available supply.

What is Bitcoin halving?

The Bitcoin halving is a pre-programmed cycle on the bitcoin’s blockchain that happens every 210,000 mined blocks, or roughly every four years.

After halving, the miner’s reward for mining new coins decreases by half. Three halvings have already occurred during Bitcoin’s lifetime. During the last halving in May 2020, miner’s rewards decreased from 12,5 coins per mined block to 6,25. Before the first halving, the reward was 50 BTC per block. This means that the number of total bitcoins in existence approaches (but can never be higher than) 21,000,000 bitcoins.

Halving events will continue to occur at the same pace until 64th halving has occurred, during which the amount of newly created bitcoins will go from 0.00000001 bitcoin per block to 0 bitcoins per block. This is expected to happen around the year 2140, meaning that fewer and fewer new bitcoins will enter the circulating supply as time passes.