NEW YORK (AP) — Sometime in the next few days or even hours, the “miners” who chisel bitcoins out of complex mathematics are going to take a 50% pay cut — effectively slicing new production of the world’s largest cryptocurrency in half.
That could have a lot of implications, from the price of the asset to the bitcoin miners themselves. And, as with everything in the volatile cryptoverse, the future is hard to predict.
Here’s what you need to know.
WHAT IS BITCOIN HALVING AND WHY DOES IT MATTER?
Bitcoin “halving,” a preprogrammed event that occurs roughly every four years, impacts the production of bitcoin. Miners use farms of noisy, specialized computers to solve convoluted math puzzles; and when they complete one, they get a fixed number of bitcoins as a reward.
Halving does exactly what it sounds like — it cuts that fixed income in half. And when the mining reward falls, so does the number of new bitcoins entering the market. That means the supply of coins available to satisfy demand grows more slowly.
Limited supply is one of bitcoin’s key features. Only 21 million bitcoins will ever exist, and more than 19.5 million of them have already been mined, leaving fewer than 1.5 million left to pull from.
So long as demand remains the same or climbs faster than supply, bitcoin prices should rise as halving limits output. Because of this, some argue that bitcoin can counteract inflation — still, experts stress that future gains are never guaranteed.
HOW OFTEN DOES HALVING OCCUR?
Per bitcoin’s code, halving occurs after the creation of every 210,000 “blocks” — where transactions are recorded — during the mining process.
No calendar dates are set in stone, but that divvies out to roughly once every four years. The latest estimates expect the next halving to occur sometime late Friday or early Saturday.
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