Imagine a factory that makes golden coins. Every four years, the boss announces that for the next while, they will only make half as many new coins per day. Since people always want more gold than there is gold to go around, having fewer coins available usually makes each coin worth more money.
The Coin Factory
The 'halving' is when the number of bitcoins given to miners as a reward drops by 50 percent. Think of it like cutting your allowance in half but keeping all your savings. If you keep spending and saving at the same rate, those coins become rarer.
Why It Matters
When fewer new coins enter the market, buyers have to compete more for them. This competition drives the price up. It is like having a popular toy where only a few are left in the store; everyone wants one, so they pay more.
Scarcity creates value when demand stays steady.
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See also
- But how does bitcoin actually work?
- How does cryptocurrency mining consume so much energy?
- What is the current environmental impact of cryptocurrency mining?
- What are the major environmental impacts of cryptocurrency mining?
- How do cryptocurrencies work and what makes them different from traditional money?