Bitcoin has just ‘halved’ for the third time, a technical adjustment which happens every four years or so, and which bitcoin enthusiasts believe makes it valualbe.
The cryptocurrency’s ‘halving’ reduces the reward for using software to ‘mine’ bitcoin from 12.5 new coins to 6.25.
Previous ‘halving’ events fuelled huge surges in bitcoin’s market value, analysts say, but this time the event is overshadowed by the coronavirus pandemic.
This ‘halving’ event did not see such a wild surge, with prices largely stable, Coindesk reports.
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The first halving occurred in November 2012 when the mining reward was reduced from 50 bitcoins to 25, and the second occurred in July 2016 when it was further cut to 12.5 bitcoin.
The previous two bitcoin halvings propelled rallies of about 10,000% from late 2012 to 2014, and roughly 2,500% from mid-2016 to the currency’s all-time high just shy of $20,000 in December 2017, according to traders.
Happy #BitcoinHalving everyone!! 🥳
Block #630000!#Bitcoin now emits 6.25 BTC every block! From 1800 a day, to roughly 900 a day, the inflation rate has changed from 3.65% to 1.8%!
The scarcest digital asset ever created has just become even scarcer!
Cheers everyone!! 🍻 pic.twitter.com/dGhgKgYRSO
— Anthony Morin (@CryptoNoel96) May 11, 2020
‘Halving’ was written into bitcoin’s code by its creator, known as Satoshi Nakamo, as a measure to control inflation.
There are only 21 million bitcoins in existence and more than 18 million are already in circulation.
Bitcoin relies on “mining” computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes.
In return, the first miner to solve the puzzle and clear the transaction is rewarded new bitcoins.
The technology was designed in such a way that it cuts the reward for miners by half after every 210,000 blocks mined or roughly every four years, a move meant to keep a lid on inflation.
That reduction in the rate at which new bitcoin enters the system should theoretically push the price up.
In the run-up to this week’s halving, bitcoin had surged nearly 40% since the beginning of the year and climbed more than 85% from its lows.
Jake Yocom-Piatt, co-founder and project lead at cryptocurrency Decred, however, believes halving will be a positive event for bitcoin and cryptocurrencies, especially in a pandemic.
Yocom-Piatt said: “A pandemic is very much a deflationary type event. Economic activity is going to take a real nosedive. The ‘halving’ of bitcoin is a necessarily deflationary action.”