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The 'Halving' Process of Creating New Bitcoins

Bitcoin Tokenomics explained simple

BTC Tokenomics refer to the economic principles / mechanism that govern the: Creation | Distribution | Use of bitcoin

Very important aspect in the BTC tokenomics is the process of "Halving"

Halving is a term used by many, understood by few.

Mining:

The process of creating new BTC is called "mining," and it involves using powerful computers to solve complex mathematical problems.

As a reward for their work, miners are periodically issued new BTC

But the rate at which new bitcoins are issued is not constant…

Like mentioned above, the rate at which new bitcoins are issued is not constant; It is designed to decrease over time.

Specifically, the number of new BTC issued every 10 minutes is cut in half approximately every four years.

This process is known as the "bitcoin halving."

The halving has a big impact on the economics of BTC mining.

As the rate of new bitcoin issuance DECREASES, the cost of mining INCREASES, as miners must continue to invest in expensive equipment & electricity to maintain their competitive edge.

What does this mean for miners?

Cost increase will reduce number of miners, as some may be unable to continue operating at profit profit.

Halving also affects the supply / demand of BTC which in turn affects the price.

As the supply decreases, & demand increases, the price of bitcoin tends to increase.

Fewer miners means fewer new bitcoins. The existing BTC become scarcer.

Short:

Halving is a mechanism that reduces the rate at which new bitcoins are created, which affects the economics of mining and the supply and demand of the cryptocurrency, which in turn affects the price

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Rarestone Compass
This post is based on this twitter thread.

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