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Bitcoin

Bitcoin halving, what is it and why should I care?

Once every 210k blocks or roughly every four years the supply of bitcoin gets cut in half until the maximum supply of 21 million is reached. This is known as a halving because the block reward is halved.

That means if you are running a bitcoin mine and you are spending $10,000 in electricity, hardware, salaries, etc to mine one bitcoin worth $10,000 you are about to only get half a bitcoin for the same effort making many mines no longer economically viable.

This is part of bitcoins programmed promise that the supply will only ever be 21,000,000 which it will reach approximately 2140.

Because miners need to sell bitcoins to fund their operations, just like gold mines have to sell gold or oil rigs have to sell oil this means that less bitcoin is available for sale and thus there is less supply and if demand stays the same the price will rise.

This is in stark contrast to the currency most compared to bitcoin, USD where the supply is always expected to increase supposedly as the economy increases but in reality to force the reallocation to whatever is politically in vogue at the time such as a banking crisis or whatever.

Commodities like gold and silver have been used in the past because of their value to weight ratio and divisibility to regulate this expansion of the money supply but bitcoin has the amazing ability to do this without the difficulty and risk that comes with physical metal. If you want to buy some diamonds on the other side of the world in a time like this bitcoin can do this but gold would have substantial additional costs. Cash via wire transfer would be capable of facilitating the transaction but would require the cooperation of multiple banks full of people carefully scrutinizing each transaction.

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