The post Bitcoin Mining Reward Halving appeared first on iceCUBED Bitcoin and Litecoin Exchange - South Africa.

Bitcoin Mining Reward Halving is This Year!

The Bitcoin Mining Reward halving, relates to the incentives on the Bitcoin network.

Any network processing information needs Computing Power. Bitcoin is no different. A company like Visa, for example, have their own computers. So, the computing power to process transaction comes from a central point; the company.

Bitcoin is decentralised. There is no company in control. So the computing power must come from volunteers. But why would someone volunteer computing power? It’s very expensive.

The Bitcoin system has to provide an incentive. So, it rewards people with bitcoins for contributing their computing power. This is mining.
Mining is simply the process of contributing expensive computing power, to process transactions, in exchange for the chance to earn a reward; bitcoins. Mining creates the record of transactions and secures them from alteration. It is also the system by which new bitcoins are created.

It is called mining because it is similar to mining gold. It is expensive, resource (electricity in this case) intensive work. ‘Digital gold‘ is the byproduct.

The software at the centre of Bitcoin, that all computers run, strictly controls how many Bitcoins are mined, over time.

If more people mine, there is more computing power. The network then automatically adjust, to make the work harder. If less computing power is on the network, the opposite happens. As a result Bitcoins are released at a predictable rate.

At the moment that reward is approximately 25 every 10 minutes. That quantity halves every 4 years. In June or July of 2016 the reward will halve again, to 12.5 bitcoins every 10 mins.

Ex-JPMorgan trader discusses the potential impact on bitcoin price of the upcoming halving of rewards on the network

— CoinDesk (@coindesk) 26 April 2016

Bitcoin Mining Reward Halving and the Effect on Bitcoin Price

This Reward Halving, it is speculated, will lead to an increase in the price of bitcoins.

75% of all the Bitcoins that will ever exist will have already been mined. With so few Bitcoins left to be mined, being released at a much slower rate, if demand remains constant, the price should rise towards a new market equilibrium.

That is the theory. However supply is perfectly known, in advance. So this information should already be factored into the price.

Historically, there has been one halving event for the reward, from 50 to 25. This had no substantial effect on the price at that time.

In reality the impact of the reward halving on the price depends on a variety of factors. We at iceCUBED will examine this more in future posts.

The post Bitcoin Mining Reward Halving appeared first on iceCUBED Bitcoin and Litecoin Exchange - South Africa.