Cryptocurrency World is a quite fascinating world where there are a lot of new and unique things whose counterpart doesn’t exist in the Fiat world. One such Thing is Rewards for Miners. Cryptocurrency is mined by miners this process is termed as Mining( you can read more on this topic in our Articles Mining and Smart Mining) , In mining Miners solve complex mathematical problems allowing them to create a block which stores transactions thereby adding a Block in Public ledger known as Blockchain and making Transactions a part of this.
Now you must be thinking, What the heck. Why will some one do that, who is that much free or has idle PC to waste electricity. Well, Amigo, it pays, Miners are paid handsomely for their efforts As an example For mining a Bitcoin block Reward is 12.5 BTC Approx 125,000US$ which is provided to them by creating new bitcoins. So you can also assume Mining is the only way to create new Bitcoins/Some other cryptocurrencies.
Now that’s Lot of money, well yeah it is, But mining is not an easy task. When Bitcoin Price dipped below 7,000$ Mining farms started shutting down. So assume that’s the cost of creating 1 Bitcoin. Pretty High, Ain’t. So those guys who are thinking that they can Buy Bitcoin later at 100$, stop dreaming.
Still, that’s a lot of money and Lots of Bitcoins being created every day. Bitcoin has a finite supply Just 21 Million coins. With around 17 Million already in supply at this rate it won’t be long when All Bitcoins will be mined and miners no longer have much of incentive to Mine(except fees), also curbing supply will allow inflation in the price which is good for investors , So a special process Knows as Mining Reward Halving was created.
Reward Halving is an event after which Rewards for Mining a bitcoin/Cryptocurrency becomes Half Than Previous. Let’s understand it in this way, Initially Mining a Block of Bitcoin rewarded Miners with 50 BTC which was later halved to 25 BTC and again later halved to current reward which is 12.5 BTC. So Reward halving means Half the reward from onwards for Miners.
How does Reward Halving Affect Price?
When reward halving event takes place, cryptocurrency is hodled by its possessors. Supply becomes less and with future new supply less demand rises. Due to decrease in supply and increase in demand, the resulting scarcity raises its price. Therefore, Reward Halving affects the price of the Cryptocurrency very positively.
Historically Reward Halving has always impacted the price very positively of cryptocurrency. History dictates that Bitcoin’s price has increased and reached an all-time high after the Reward Halving Events.
How does Reward Halving Affect Miners?
Reward Halving affects miners in both negative and positive manner. Small/Marginal Miners gives up crypto mining because of the reduced worth of the reward. Big miners hodl mined cryptocurrency and later sell when it’s profitable to them and hence survive which in turn secures Cryptocurrency network against attacks such as 51% attack even during dull time.
Big miners are indeed in luck with Bitcoin as whenever Reward halving happened Bitcoin Price surged later. First Bitcoin halving event, took place in 2012, recorded all-time high price for BTC at $1000 dollars. Second Bitcoin Halving event in 2016, recorded all-time high price for BTC at $19,500 in mid-December 2017. So, these price hikes of BTC offsets the decreased reward of mining after halving.
How does Crypto Reward Halving Affect Users?
The Crypto Reward Halving is a happy event for the users of cryptocurrency. They buy, wait and welcome the halving event. Halving event doubles or triples their hodled cryptocurrency price. Some users, who are incapable of storing or holding cryptocurrency, sell their currency and enjoy little bits of benefits of event. However for new investors that’s a bad deal.
Litecoin Reward Halving Event is Coming-
Litecoin reward halving events record the highest prices for the cryptocurrency after and before its halving event. Litecoin is set to undergo Reward halving in August 2019, and it is performing amazingly well already in market due to it also having limited number of total Litecoins. Currently Mining A Block of Litecoin gives you 25LTC which will be later reduced to 12.5 LTC same as bitcoin.
Regarding Bitcoin, Next Bitcoin Halving is expected to take place in 2020, and it is being forecasted that 1 BTC price will cross $20,000. Also, another cryptocurrency with reward halving is Zcash in late 2020.