By WYATTE GRANTHAM-PHILIPS (AP Business Writer)
NEW YORK (AP) — In the next few days or hours, the individuals who create bitcoins through solving complex math problems will see a 50% decrease in their reward, effectively cutting the new production of the world’s largest cryptocurrency in half.
This could have various effects, from the price of the asset to the bitcoin miners themselves. And, as with everything in the volatile cryptoverse, it's hard to predict the future.
Here’s what you should know.
WHAT IS BITCOIN HALVING AND WHY DOES IT MATTER?
Bitcoin “halving,” an event that happens about every four years, affects the production of bitcoin. Miners use farms of specialized computers to solve complex math puzzles; and when they solve one, they receive a fixed number of bitcoins as a reward.
Halving does just what it sounds like — it reduces that fixed income by half. And when the mining reward decreases, so does the number of new bitcoins entering the market. This means the supply of coins available to meet demand grows more slowly.
Limited supply is one of bitcoin’s key features. Only 21 million bitcoins will ever exist, and more than 19.5 million of them have already been mined, leaving fewer than 1.5 million left to be mined.
As long as demand remains the same or increases faster than supply, bitcoin prices should go up as halving reduces output. Because of this, some argue that bitcoin can offset inflation — however, experts emphasize that future gains are never guaranteed.
HOW OFTEN DOES HALVING OCCUR?
In accordance with bitcoin’s code, halving occurs after the creation of every 210,000 “blocks” — where transactions are recorded — during the mining process.
No specific calendar dates are set, but this roughly happens every four years. The latest estimates suggest the next halving will occur sometime late Friday or early Saturday.
WILL HALVING IMPACT BITCOIN’S PRICE?
We can only wait and see. After each of the three previous halvings, the price of bitcoin was mixed in the first few months and ended up significantly higher one year later. But as investors know, past performance is not a guarantee of future results.
“I don’t know how significant we can say halving is just yet,” said Adam Morgan McCarthy, a research analyst at Kaiko. “The sample size of three (previous halvings) isn’t big enough to say