If there is one news item that has led to much speculation in the financial field, it is the block halving sessions to come in the year 2020. Let us have an in-depth look at the concept and its background to get a better comprehension.
Table of Contents
- Block Halving
- Cryptocurrency Mining
- Block Reward
- Block Halving In Different Coins
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Zcash (ZEC)
- Ethereum Classic (ETC)
- Bitcoin SV (BSV)
- Zcoin (XZC)
What caused ripples in the financial technology sector is the concept of cryptocurrencies. It appeared a decade ago as a form of digital currency that functions as an alternative to the existing fiat currencies. At the moment, its use has gone mainstream with many opting for various crypto units to carry out their transactions.
There are various digital assets available with Bitcoin as a chart-top currency. One thing that sets it apart from the traditional fiat currency is decentralization. This means that BTC has no central bank or third parties involved in tackling transactions.
The privacy of cryptocurrencies and the amounts of fees are the factors that make them a very good option for deals carried out over the Internet.
Still, in the crypto asset environment, there is a regular move in the system known as Block Halving. Let us take a closer look at this crypto-related concept.
What is Block Halving
To understand the concept of Block Halving, you need to go deeper into the cryptocurrencies’ concept of Blockchain technologies. According to Investopedia, they are information blocks in the cryptosystem. They store important information about transactions such as date, time, and exchange value. They also carry the info about the participants involved in the transactions, as well as distinguishing data to differentiate them from other blocks.
When stored in a definite order, they bring a series-like organization (this is why blocks form a chain). The blocks are secure, and adding a block to the sequence requires initiating a transaction and verification where the participants and other details are noted, such as amount, date, and fiat value.
Finally, there is hashing. In hashing, the blocks get a unique tag to distinguish them from other blocks in the chain. The hash is a unique identity code that all other blocks have.
What is Cryptocurrency Mining
Nearer to get to the concept of Block Halving, you need to understand Crypto Mining as it pertains to Blockchain technology. As from Wikipedia, mining refers to adding and validation of transactions to the Blockchain. In this case, every operation has its own identity, with its integrity being a significant concern for the welfare of the entire chain.It is a complex process that is electricity extensive and carried out by specialized computers with a robust system. The high-power use is a result of the high heat produced due to the extensive work carried out. The miners get remuneration for their role in terms of crypto tokens or coins.
What is a Block Reward
A block reward is a payment for mining services to the associated parties. For Bitcoin mining, the rate was initially 50 BTC per successful block. The price gets to half the preceding value after the discovery of 210,000 blocks. When you consider that a one-megabyte block is produced every 10 minutes, then the halving period comes to a span of every four years. The last block halving came in 2016, hence it is an expectation that it will occur once again in 2020.
A look at the above scenario makes the definition of block halving clear. It is simply the half-rate employed to the value of miner reward and occurs after a four-year cycle. Focusing on the rate, the value has a possibility of reaching the zero value after a total of 64 iterations.
Block Halving in Different Coins
As indicated earlier, there are several crypto coins in the digital alternate currency scene. Most of them undergo halving, and it is necessary to know their rates and possible influences in the market. Below is a look at the halving process of various cryptocurrency units.
1. Bitcoin Halving (BTC)
Bitcoin is one of the most popular cryptocurrencies, and it was the first to gain mainstream acceptance as a digital currency form. It is also the most valuable to date, and its performance in the international exchange market causes a ripple effect on the other crypto units.
Its block reward was initially worth 50 coins when it first got to the market in 2008. At the turn of the decade, the values of the currency were being appreciated, and it underwent its first halving in 2012. It then went to a bear market, due to the halving process, one whose heights came by around 2016 when the succeeding halving was initiated.
The next halving should come in May 12, 2020. As of 2019, the rate per block in terms of reward was 12.5 BTC. When the next event dawns, the price will come down to the standard of 6.25 BTC.
Presently, the supply peak of Bitcoin is currently at 21 million units. As the halving occurs, it means that it will take a considerably longer time for the circulatory height to reach the indicated value after the event.
Such a situation comes with chain effects in the economic field. As from Bitcoin wiki, the spendable amount is usually low—this is an aspect of controlled supply.
Effects of Bitcoin Halving
Considering Bitcoin is one of the most valuable and popular crypto coins, block halving presents the following results.
The halving sort of keeps the value of Bitcoin in check. It is a regulatory activity that serves to put the values in amounts preventing a case of severe inflation. The inflation may come about due to the demand-supply pull, where the market leans more on supply rather than demand. With every halving, the rate retains its value within a set limit. This is an excellent move towards ensuring a sustained superb performance of Bitcoin even against the fiat currency.
Increased Buying into Its Market
The mainstream appeal of Bitcoin has taken it to the financial and crypto markets. The two halving occasions witnessed an entry into a bull market where the value went up. Notably, such a trend came to play in 2016.
Competition to Other Coins
The upped value of Bitcoin can lead to a situation where many invest in it while shunning other coins or tokens. Considering that Bitcoin is currently the most valuable currency, with its value being quite distant to the one trailing it.
Generated Interest in the Crypto Concept
When the price gained the value in the 2016 run, there was a generated interest in the entire cryptosystem. If the same plays this time around, it can lead to the mainstream appeal of other digital assets, thereby improving the entire crypto market.
2. Bitcoin Cash Halving (BCH)
Bitcoin Cash is another crypto unit from the vast catalog of the alternative currencies. Basically, it is a forked currency of Bitcoin that emerged in the market in 2017. It came up due to the need to accommodate the transactions-per-second count that had been increasing.
Many users considered this Bitcoin hard fork the initial currency’s upgraded version ready to handle new age gaps created by the cryptosystem, while diehard Bitcoin proponents think it is doubtful.
When it comes to block halving of Bitcoin Cash, it has the same value to Bitcoin. It has a present rate of 12.5 BCH, and its block halving event will come May 24, 2020.
Bitcoin is almost 30 times as strong as Bitcoin Cash in terms of exchange volume, and halving can see its value improve.But, there is a party of investors who think that such an occurrence will lead to the miners heading to Bitcoin as the two have an almost similar hash algorithm.
3. Beam Halving (BEAM)
In the crypto industry, Beam is one of those projects making significant achievements, it came by in 2019.
Beam halving started on January 4, 2020—just after a year of circulation. Its block reward currently stands at 50 BEAM, a double slice from the initial that was 100 BEAM when it first came to the scene. The next halving session should come in 2024.
The reward system is kind of different from the other coins. For example, when the block reward was 100 coins, the miners only received 80% while the remaining 20% went to the treasury. The same applies to the 50-coin reward value where the miners pocket 40 and 10 go to the treasury. The situation will, however, change in the next cycle, where instead of getting 20 coins of a 25-coin offer, they get the full amount.
Effects of Subsequent BEAM Halving
The first halving has brought out positive reviews considering it just happened almost a year after its launch. It has demonstrated a level of stability.
A look at the observed decent reviews shows that Beam has a unique path crafted for it if it maintains the pace. The second halving might see its value further improve and make it a viable entry to the cryptocurrency scene.
High Performance in Financial Markets
Financial markets have been welcoming crypto units—this is one of the factors behind the acceptance and use of alternative currency. The next reward value halving will ultimately reduce the number of circulating coins. Such a move has the effect of upping its value.
4. Zcash Founders Reward (ZEC)
Zcash is another alternative digital form of alternative currency that began its operations in 2015. ZEC launch was a move toward the use of cryptography for enhanced user privacy.
It has a cap limit of 21 million units in circulation—just like Bitcoin. Zcash uses a Proof-of-Work mechanism to validate blocks and currently each block has a 12.5 ZEC reward for the miner who finds the case.
Its first halving session will come sometime in October 2020, where the mining reward will come down to a value of 6.25 ZEC.
When the time to slash the reward value comes, many eyes will be on its performance more it’s worth following because it provides a more secure system, benchmarking excellently against established units such as Bitcoin.
Effects of Zcash Halving
Zcash is a common feature in various financial and crypto trading markets as a trading instrument. The occasion of reducing the reward value has the effect of causing volatility in the market. The volatility may either lead to a bullish or bearish market, depending on the demand-supply pull. However, pundits anticipate a bullish inclination as there is a balance achieved in a bid to have controlled supply.
If the volatility leads to more buying in, it may end the year on a higher note, with a focus on its value.
5. Ethereum Classic Halving (ETC)
Ethereum classic is a project fork of the Ethereum (ETH), meaning they use the same protocol. The story of the formation of the classic coin is an interesting one, as evident from CoinCentral. Initially, there was only Ethereum in existence. Then, back to 2016, venture capital fund DAO came by as a suitable platform for smart contract investments. However, the platform had some evident security vulnerabilities giving a loophole for illicit channeling of funds.
The fear came to confirmation with the unauthorized transfer of funds, amounting to around $50 million. The security breach led to a tussle with some members of the Ethereum community proposing a hard fork to counter such security breaches in the future. In July, the hard fork was implemented, giving rise to Ethereum classic.
Ever since its implementation, there has been a love-hate relationship transcending to the two coins' respective communities. The users of the Ethereum classic coin applaud its immutability that ups its security and privacy features, preventing future breaches.
So far, the performance of this altcoin is something to write about, considering it was one of the best performing at the beginning of the year. It made it to the top-ten lists, which suggests its stability.
The halving session of this coin is not clear, with some sites pointing it to have an inflationary model, where supply will be constant. However, its performance in 2020 is of significant concern as it is the 4th year cycle in halving for most crypto coins.
6. Bitcoin SV Halving (BSV)
Bitcoin SV is a hard fork from Bitcoin Cash. It came by in 2018 after a network upgrade scheduled for November that year, and resulted in a hash rate war. Among its fundamental properties were the large-sized blocks in chains. When it comes to performance, it has not been fairing quite as expected, but its recovery is what amazes many interested parties.
Sometime in mid-2019, it experienced a 40% dip, which was an entry into a bearish run that would take some time to recover from. Then, in early 2019, it seems to have fully recovered from the bear market and registered improvements when it comes to its valuation.
As it is an altcoin of Bitcoin, its first halving will probably be sometime around mid-2020 (April-May), just like Bitcoin and its fork Bitcoin Cash. Many investors banking in the BSV market are waiting for the halving session as it may bring fortunes they can benefit from.
7. Dash Halving
Dash is another altcoin derived from the Bitcoin protocol. It appeared in 2014 and did not start well in the market due to high speculation that it would take on a pump-and-dump model. DASH came in to fill the gap of privacy and security.
Dash ranks among the top crypto coins available, and it reached its peak in 2017 when its value went up tremendously. At the moment, it is performing decently, and we have to wait and see how the half-life moment of other major coins such as Bitcoin will affect it.
When looking at Dash's half-life session, you notice that it differs from the other coins in the model. Whereas most crypto units have four years to the block reward reduction, Dash takes 383 days to the occasion.
It decreases its emission by 7.14% every 210,240 blocks bringing the interval to 383.25 days. Its next occasion will be sometime in April 2020. At the same time, most coins are going to experience their block halving.
Effects of Dash Halving
One of the goals of Dash is to go to the mainstream market and feature as a standard exchange unit. Its endeavors in this area have seen it partnering with other companies, and it seems this move is paying off. Block halving will attract impressive and much-needed attention it needs to gain acceptance among buyers. Many industry players envision a situation where Dash will increase value, and this will boost its reputation.
8. Zcoin Halving (XZC)
Zcoin, also known as XZC, is a crypto coin that emerged in September 2016 as the first to implement the Zerocoin protocol. Over the few years since its inception, it has brought in significant advancements to its systems to make them more viable in the economic environment. It has also attracted several investors, further upping its rating value in the markets.
XZC follows the same halving cycle as the main cryptocurrencies—at 21.4 million units. To maintain the level, it has a halving session that comes in the standard 4-year cycle.
During rewarding, miners receive 80 percent of the indicated block remuneration, while 20% of the value goes to founders' reward. The reward is critical to the system as it returns as compensation to the early investors. There are also opportunities for graphic design, Zcoin core development, web development, marketing, etc.
After halving that will take place after a four-year waiting period, the miners and Znode will get 100% of the block value. Zcoin's will take part sometime in mid-2020.
The block halving series expected on many cryptocurrencies in 2020 has much relevance to both the crypto world and the financial sector.
The idea of scarcity due to the reduction in the block reward amount will have an effect of improving the value of the units in the future and is crucial to keep inflation under control. It means that with time, the crypto markets will be more lucrative if other supporting factors remain constant.
One of the key players in the crypto market is Bitcoin. It has been in the industry for long and also has a decent value making it the most famous coin. Any significant occurrences with this unit cause a chain reaction on the other currencies, even if mild.
Keep an eye on the market conditions watching the price movement and also looking at factors that may affect it, such as fiat currencies’ rates and the state of the economy.