The Bitcoin halving that took place on May 11 2020, was a much-awaited event.
It can be akin to waiting for the premiere of the Avengers: The Endgame. There were a lot of speculations as to whether the halving will affect the price of bitcoin. However, days after the halving, the volatility expected is yet to occur. On the side of the miners, there are still speculations on what the halving could mean for them and how prospective mining now is for a long-term plan. However, one aspect no one seems to be looking at is the effect of the bitcoin halving on blockchain business applications.
On May 11, 2020, the third bitcoin halving occurred. Speculations have it that while supply will shrink, demand will increase and thereby drive up the price of bitcoin. A lot of debate on bitcoin price predictions and the market response has been shovelled back and forth. However, how favorable will the market be for blockchain business application, what effect will the halving have of Dapps for businesses is a topic that has been sidelined.
What Exactly is the Bitcoin Halving?
The Bitcoin halving refers to the division of the reward miners get for the creation of new bitcoin. Bitcoin halving happens every 4 years. The first halving occurred in 2012 and saw bitcoin mining reward move from 50BTC to 25BTC. In 2016, the second halving occurred and mining rewards went to 12.5 BTC. The third halving which occurred on the 11th of May 2020 will have bitcoin miners go from earning 12.5 bitcoins per block mined to 6.25 BTC.
To understand this better, transaction records are stored on the blocks within the blockchain. A”block” contains a file storing 1 MB worth of bitcoin transaction records. “Miners” have to compete and solve a difficult mathematical problem to add the next block to the blockchain using specialized hardware and locking the block so it can’t be audited. Once they are successful, miners are rewarded with newly created bitcoin.
The Implication of the Bitcoin Halving on Blockchain Business Application
The blockchain has slowly begun to attract mainstream investors and the business world as a whole. While many see it as the gateway to solving the issue of lack of financial inclusion, some others see it as a payment gateway. For others, the numerous use cases of the blockchain hold a lot of promise for their business model. Some still wonder if bitcoin and other cryptocurrencies are any good and if they can help you run businesses better. Some other companies such as Bitpay, are already utilising the blockchain in solving real-world problems.
However, speculations have it that the price of bitcoin will likely skyrocket after the bitcoin halving. Technically, the halving does not affect the blockchain. Businesses can still use the blockchain to power smart contracts to fulfill transactions or empower decentralised data for companies involved in big data. In addition, supply chain management can be made less complicated and easy to track using the blockchain. These use cases of the blockchain are unaffected by the halving.
One impact that the bitcoin halving will have is that there will be a reduction in the amount of newly mined bitcoins per day, falling from about 1,800 to 900 bitcoins. Also, miners will get half the amount of their previous daily revenue. As there is a decrease in the rate of bitcoin creation, supply tightens and many have argued that it will lead to a bullish market. As the revenue for miners is reduced, less efficient miners will be forced out of the system and this may lead to a reduction in the computing power of the Bitcoin Network.