Explained simply: What is Bitcoin halving?

DW (English)

Bitcoins are created as a reward when someone with lots of computing power produces a new block of transaction data. This reward is “halved” every few years, making Bitcoins more expensive and mining only worthwhile with energy-efficient computers.

Transcript

00:00 In the realm of cryptocurrency, a big event has just happened. A Bitcoin halving. But

00:08 what is that exactly? What do China, the US, Norway and Kazakhstan have in common? Right,

00:15 they all have a big Bitcoin mining scene. Bitcoin miners are companies with lots of

00:20 computing power. It's energy intensive, so they locate themselves where electricity is

00:25 relatively inexpensive. Miners act as digital bookkeepers who secure all Bitcoin accounts

00:32 and transactions. And that takes huge amounts of processing power. But for professional

00:38 miners, all of that effort pays off because their work is rewarded with Bitcoins. 900

00:46 new Bitcoins are produced each day, at least for now. But things can't just go on this

00:51 way indefinitely. Over 19 million Bitcoins have already been generated, yet the total

00:57 supply of Bitcoin is capped at 21 million. That's stipulated in the Bitcoin protocol

01:03 to protect the currency against inflation, so the miners' rewards must eventually fall.

01:09 And they do that all at once, at what's called a Bitcoin halving. Occurring roughly every

01:17 four years, that's when miners' rewards are cut in half. Four halvings have now taken

01:24 place in 2012, 2016, 2020 and now in 2024. The latest halving just occurred on April

01:35 19th. For the miners, less reward means more cost pressure. So energy prices at their data

01:43 centre locations are growing increasingly important. Yet miners stand to profit too.

01:49 Because when fewer new Bitcoins are being made, yet demand remains the same, or even

01:54 increases, the cryptocurrency rises in value. And since everyone knows that, and they all

02:00 want to cash in before others do, the market price for Bitcoin fluctuates even more wildly

02:06 than usual around the time a halving occurs. No longer a niche market, cryptocurrencies

02:12 are now a highly speculative asset class of their own.

02:16 (upbeat music)

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