The Banking Executive Magazine - March 2024 Issue

What Affect Bitcoin Price This cost-efficient characteristic ren- ders them an economical choice catering to both enterprises and indi- viduals seeking streamlined transac- tions. BITCOIN HALVING Even though Bitcoin is digital money, it cannot be created endlessly, and verifiable scarcity is core to its value proposition. Foundational to the Bit- coin protocol are two concepts relat- ing to scarcity: First, there is Bitcoin's limited supply. The protocol dictates that the total number of Bitcoins that can ever exist is capped at 21 million, and it is impossible for more Bitcoins to ever exist. This is contrary to fiat cur- rencies, where more money can be printed at the discretion of the gov- ernment or central bank, potentially leading to inflation. The second concept is referred to as the halving. Approximately every four years, the Bitcoin mining re- ward, also known as the "block re- ward," is halved. This means that the reward given to the contributors se- curing the network is reduced by 50%, directly impacting the rate at which new Bitcoins are introduced into circulation. In May 2020, the amount of new Bit- coins added to the network (every 10 minutes) via virtual "mining" was halved from 12.5 to 6.25. In April 2024, it will drop again to around 3.125 — and the process will con- tinue until all 21 million coins have been mined. At this point, miners will rely solely on transaction fees to validate blocks. By issuing fewer Bitcoins over time, the halving makes it more likely that Bitcoin's value will rise (assuming consistent levels of demand), which is in sharp contrast to fiat currencies, which typically decline in value over time via inflation. The halving is one of the ways Bit- coin's protocol maintains scarcity, the BANKING EXECUTIVE 10 ISSUE 183 MARCH 2024