The Halvening Just Halvened

While Bitcoin may have had its ups and downs, it is certainly a trend that seems to be here to stay, with more users everyday. But newer users may be off to a rockier start, with rewards from mining cut in half.

The rewards from mining Bitcoin just got cut in half, after code written into the digital currency kicked in last July 9.

When Bitcoin was released in 2008, it had code that reduced the reward from bitcoin mining by half every four years. This keeps in check the currency's inflation, due to the growing number of miners and ever-faster computers that mine for them.

From 25 bitcoins up for grabs globally every 10 minutes, now its just 12.5. That translates to ~$8,125 per block mined, compared to $16,250 before the halving. The last time this happened, the rate was cut from 50 to 25 blocks.

Silver Linings

This may seem like a bit of gloom and doom. In fact, its already claimed a casualty. Sweden's KnCMiner declared bankruptcy in May due specifically to the hit in profits from the expected reward cut.

But this is the intended effect, like a bitcoin natural selection: only the lean survive. Only companies that have the leanest and most efficient operations, and those that prepare for the reward cuts survive and thrive in this situation.

The "Halvening" also sweetens the pot for these operations, removing competitors and making their supply up for grabs. This cut is also one of the main reason for the huge price increase of bitcoin over the past 6 months, with market anticipation for the event.

When it comes to worries about the next Halvening in 2020, the hope is that the number of bitcoin transactions will have grown sufficiently to mean that the small fees paid by users will make up enough of their income to smooth out the profit cut.

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