For the third time in its 11-year history, Bitcoin has gone through a much-hyped event called 'halving'.
The process occurs roughly every four years, marking a technical adjustment to the foundation of how the world's biggest cryptocurrency is created.
Now, this begs the question: what really happens in halving, and will it have any effect on the crypto market?
Let's find out.
Reducing the rate at which Bitcoins are created
Halving is the event that reduces the rate at which Bitcoins are created.
Miners solve complex mathematical puzzles using specialized software to clear blocks of transactions and generate new Bitcoins. But, when halving takes place, the cryptocurrency yield of 'mining' is reduced by 50%.
This year's halving event has reduced the reward for unlocking a 'block' through mining from 12.5 new Bitcoins to 6.25.
But, why Bitcoin production is being reduced?
Satoshi Nakamoto, the creator of Bitcoin, had written halving into the mathematical code of the cryptocurrency to regulate its supply, without a governing body.
According to it, halving occurs after 210,000 blocks, which takes around four years, and will continue until the number of Bitcoins generated per block falls to zero, thereby capping the total number Bitcoins ever to be produced to 21 million.
This has contributed to Bitcoin's high value
This limited supply of Bitcoin is said to be one of the reasons behind its high value in the market and the fact that it is more stable than the other crypto coins that are vulnerable to devaluation these days.
However, some investors have also highlighted that the event has reduced the incentive for Bitcoin miners and they could switch to more profitable cryptocurrencies.
Prices will increase in the long run
That said, in the long run, the impact of this and the upcoming halvings is expected to result in sharp increases in Bitcoin's prices, provided the demand for the cryptocurrency stays.
The halving event that took place in 2012 shot up Bitcoin's value by 80 times, while the one following that increased the value of the digital coin by 300%.
Bitcoin has gained more than 20% this year
Since the start of this year, Bitcoin has gained more than 20%, touching the $10,000 mark, a three-month-high. Currently, it is trading at $8,930.