Halving is a process of reducing the reward for mining a block in the cryptocurrency blockchain. For example, in the case of Bitcoin, the block reward halves approximately every four years. This process is called halving. It is inherent in networks where the cryptocurrency operates on the Proof-of-Work consensus algorithm.

But why is it needed? Halving plays a role in controlling cryptocurrency inflation by reducing the issuance of new coins.

Algorithms of cryptocurrencies like Bitcoin do not allow printing an infinite amount of money. The emission of Bitcoin is limited to 21 million coins, and through the mechanism of halving, the supply of coins in the Bitcoin network grows gradually and noticeably lags behind the pace of demand growth.

The significance of this process can be seen by comparing Bitcoin to gold. The world’s gold reserves are limited, and with every gram mined, obtaining the remaining gold becomes increasingly difficult. It is due to such limited supply that gold has maintained its value as an international medium of exchange and store of wealth for over six thousand years.

The impact of halving on cryptocurrencies can be significant. It typically stimulates the rise in the cryptocurrency’s price. Before and after halving, demand for digital currency exceeds supply, and the exchange rate begins to rise.

Halving is not only an event that changes the cryptocurrency economy but also a clear example of how blockchain technologies gradually reshape the financial sphere, introducing changes in the ways of storing and transferring value.

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