Bitcoin ‘halving’: What does the much-hyped event mean?

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Bitcoin has just undergone a very sensational adjustment that has reduced the rate at which new currencies are created.

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The so-called "half in half" of the world's largest cryptocurrency takes place approximately every four years.

The digital currency has what we call "miners", which run software that runs to solve complex mathematical puzzles in exchange for Bitcoins.

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The mid-Monday event means that the reward for unlocking a "block" has been reduced from 12.5 new coins to 6.25.

Half were written in the cryptocurrency code by its creator, known as Satoshi Nakamoto, to control inflation.

This is the third half since the creation of Bitcoin in 2009. The first occurred in November 2012 and the second in July 2016. The next half is scheduled for May 2024.

The Bitcoin code also means that rewards for miners will continue to halve every 210,000 blocks until they reach zero in about two decades, limiting the total number of Bitcoins that will already exist to 21 million.

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This is because – unlike currencies like the dollar, pound or euro – digital currencies do not have central banks to regulate their supply.

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Supporters of the cryptocurrency say this scarcity is part of what sustains its value and makes it a potential safe haven against currencies vulnerable to devaluation in times of economic crisis.

The digital currency has gained more than 20% since the beginning of this year, reaching $ 10,000 last week. This came after a report that hedge fund manager Paul Tudor Jones supported the cryptocurrency as a safeguard against inflation.

However, some investors have pointed out that cutting it in half can make cryptocurrency less attractive to mining companies.

"The incentive is less for miners to now explore Bitcoin. Miners are likely to switch to more profitable cryptocurrencies," Stephen Innes of AXI Corp told the BBC.

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