Bitcoin has just gone through a much-hyped adjustment that reduced the rate at which new coins are created.
The world’s biggest cryptocurrency’s so-called “halving” happens roughly every four years.
The digital currency relies on what are known as “miners”, who run software that races to solve complex maths puzzles in return for Bitcoins.
Monday’s halving event means that the reward for unlocking a “block” has been cut from 12.5 new coins to 6.25.
Halving was written into the cryptocurrency’s code by its creator, who is known as Satoshi Nakamoto, to control inflation.
This is the third halving since Bitcoin’s creation in 2009. The first took place in November, 2012, and the second in July 2016. The next halving is due to take place in May 2024.
Bitcoin’s code also means that rewards to miners will continue to halve every 210,000 blocks until they reach zero in around two decades’ time, limiting the total number of Bitcoins that will ever exist to 21 million.
This is because – unlike currencies such as the dollar, pound or euro – digital currencies have no central banks to regulate their supply.
Supporters of the cryptocurrency say that this scarcity is part of what underpins its value and makes it a potential safe haven against currencies that are vulnerable to devaluation during times of economic crisis.
The digital currency has gained more than 20% since the start of this year, touching $10,000 last week. That came after a report that hedge fund manager Paul Tudor Jones has backed the cryptocurrency as a safeguard against inflation.
However some investors have highlighted that halving could make the cryptocurrency less attractive to miners.
“The incentive is less for miners now to mine Bitcoin. Miners will probably switch to more profitable cryptocurrencies,” Stephen Innes from AXI Corp told the BBC.
bbc