Bitcoin Halving

Bitcoin Halving

News: Crypto traders and Bitcoin miners are preparing for the ‘Bitcoin Halving’—predicted to happen in April.

What is Bitcoin?
• Bitcoin was introduced in 2009 by an anonymous creator known as Satoshi Nakamoto, is a decentralized, digital currency exchanged through a peer-to-peer network without centralized authorities.
• It’s the world’s first decentralized cryptocurrency, using blockchain technology to secure and verify transactions.
• The Bitcoin network is public and open-source, meaning anyone can participate.
• Bitcoin combines its network, cryptocurrency, and blockchain to record transactions transparently, prevent double spending, and ensure consensus via a process called “proof-of-work”.

What is Bitcoin halving?
• Bitcoin halving is a significant event in the Bitcoin network that happens approximately every four years. It refers to the reduction by half of the reward given to Bitcoin miners for verifying transactions and adding new blocks to the Bitcoin blockchain.
• This event also cuts in half Bitcoin’s inflation rate and the rate at which new bitcoins enter circulation. The halving mechanism helps make Bitcoin a scarce, inflation-resistant resource.

Impact on miners:
• Reduced Rewards: After each halving, Bitcoin miners receive half as much Bitcoin for their services. This slows the rate at which new Bitcoins enter the market.
• Increased Competition: The reduced rewards make mining more competitive, encouraging miners to source cheaper sources of fuel to power their operations.
• Survival of the Fittest: The halving can unleash a “survival of the fittest” battle among miners. Larger companies secure newer and more-efficient mining machines and may consider acquiring smaller miners to survive and benefit from the halving.

India’s stand on cryptocurrency
• The Reserve Bank of India (RBI), has long recommended a complete ban on all crypto, warning that it has the potential to destabilize the country’s monetary and fiscal stability.
• Despite having no regulatory framework for crypto, the Indian government had introduced a new tax regime, taxing crypto income at 30% and a 1% tax deducted at source (TDS) on crypto transactions.