Halving means a 50% reduction in the production and issuance rates of new coins and block subsidies for miners. This usually happens after specific intervals, and is designed to stabilize a digital currency’s issuance rate during the mining process.
For every new block a miner “discovers,” the blockchain produces a new coin as a reward. Halving cryptocurrency issuance rates ensures that new coins or tokens are made at a controlled rate, essentially regulating the crypto mining process.
For example, with Bitcoin halving, the blockchain network will decrease the issuance rate of these subsidies by half every time it reaches the 210,000 block mark. This means the number of coins produced after this mark is reduced by 50%, approximately every four years.
This process is already integrated into the blockchain’s code, and will take place continually until the last piece of Bitcoin is mined and owned..
Aside from regulating the crypto mining process, the process of halving also ensures that the value of these digital assets doesn’t depreciate.
By ensuring that the supply for these tokens doesn’t exceed or overtake the demand, cryptocurrencies can remain valuable, possibly even growing in value as time goes on and as a specific coin becomes rarer.
However, the halving process — specifically Bitcoin halving — usually comes with a higher level of market volatility, since the coins that are yet to be mined will increase in value. This is also why some investors choose to HODL the coins they already own.
Of course, halving doesn’t automatically mean an increase in demand for these digital currencies — and when the demand doesn’t increase, it leaves little to no incentive for miners to continue the mining process.
This is why some tokens, like Bitcoin, have other precautions in place. For example, if halving doesn’t increase the demand, the difficulty of mining new blocks can be decreased so they’ll more easily be discovered.
The process of halving impacts the price of cryptocurrencies positively since crypto sellers have to raise their prices to offset the doubled costs of mining new coins. In this way, they stand to earn more profit when a halving event occurs.
Understanding halving can benefit you if you’re a cryptocurrency investor. This is especially true if you’re dealing with Bitcoin. Therefore, make sure to learn more about Bitcoin and its next halving to see how you can profit more from your investments.