The Bitcoin halving will be approaching in 2024. Historically, every halving has resulted in Bitcoin*** In this article, we'll explain what Bitcoin halving is, how it relates to Bitcoin mining, and how it affects transaction fees.
Before diving into the Bitcoin halving, it is essential to understand how mining works on the Bitcoin blockchain. Mining, metaphorically named after extraction, involves validating transactions (POWs) to generate new bitcoins and validate transactions on the Bitcoin blockchain. Individuals who use computers or mining hardware to carry out this process are called miners, which leads to the creation of blocks.
Miners use valid transactions to mine new blocks, which require approval from other miners (more than 51%). This process strengthens cybersecurity and establishes digital scarcity.
In mining, miners earn block rewards for processing transactions. Bitcoin halving involves halving those block rewards after every 210,000 blocks mined. This measure prevents too much bitcoin and curbs the risk of hyperinflation. By halving the block reward, the issuance of new bitcoins is effectively halved.
Another benefit is the gradual release, which promotes a more equitable distribution and prevents control by early adopters or authorities. It is halved approximately every four years, previously in 2012, 2016, and 2020. The next halving is expected to take place in April 2024.
Given the critical role of miners in cybersecurity, there are concerns about compensating miners for their income in addition to the block reward. In addition to block rewards, miners are also incentivized by transaction fees. As a result of the halving, the block reward will be reduced to zero in the long run, and transaction fees will become the only income for miners.
Recent market data shows that transaction fees have risen from 1%-2% of total miner rewards to over 20% over the past six months. This increase is partly attributable to BRC-20 innovations.
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