When talking about Bitcoin price, there are memorable milestones that relate to the coin’s price movements. Halving is one such event that occurs every four years and has a lot to do with Bitcoin’s supply and demand.

Bitcoin supply is capped at 21M, which means only 21M Bitcoin will ever be mined and circulated in the market. This limited supply means scarcity. So every four years, mined Bitcoin blocks are programmed to be cut in half to maintain this scarcity, and historically, this has pushed prices up. More on this in the next lesson!

When we say ‘a group of computers,’ this can literally mean thousands of computers that require an internet connection to work. These computers are constantly solving complex equations to keep the Bitcoin network secure and to verify new transactions. 

This process uses up a lot of electricity — not to mention PC hardware — as specialized pieces of equipment are needed to make sure the Bitcoin network is maintained. People who spend their time, money, and resources (like building expensive, powerful computers!) are called Bitcoin miners. Now, what do they get for network upkeep?

This is where Bitcoin comes in as a reward from all that mining. Bitcoin is the compensation received when people contribute their computers to the network to help process transactions, helping maintain it. Hence, there is an incentive for more people to join in the Bitcoin network and improve its stability and security.

Much like how traditional gold was found after a lot of hard work by miners, Bitcoin is ‘mined’ and retrieved after every block transaction is confirmed by the computers. The halving event is programmed into Bitcoin’s code to promote scarcity, and fewer Bitcoins are mined every four years, making it more valuable.

An Incentive to Mine