What’s so great about the beginning stages of a crypto’s mining network? (Read Full Blog Article here) A glance at Bitcoin’s mining history and it’s value growth. When Bitcoin started out in 2008 (and officially active in 2009), it was relatively easy to mine coins for those who had some technical knowledge, and knew how to get their CPU’s set up to mine some Bitcoins. The mining reward was high (50 coins per block) and had not halved ever before, meaning that miners had a fountain of a supply of Bitcoins and the price of mining it and competition was low. Although it was easy to mine the coins and miners invested money for mining equipment the value of the Bitcoins weren’t too great yet. For the first two years (2008 - 2010) one Bitcoin’s value was just a few cents worth (To be exact, R1.19 in 2010). Not only was the value close to zero, but Bitcoin was slow and difficult to sell (low liquidity) and we only started to see an increase in the value/price and demand from 2011 onwards. This means that for three years Bitcoins weren’t worth much and miners simply pocketed the coins, saving it for later. It was well worth the wait for the miners who did not sell their coins immediately... Ten years later on 15 December 2017, the price of one Bitcoin spiked to an all time high of $17,900 - that is about R265, 890.18 PER BITCOIN. The miners who had kept their fountain of coins became instant millionaires. So why was the value of Bitcoin so slow to grow and then surged to the all time high (ATH) we saw in 2017? There are a number of contributing factors we will save for another blog read, but here are some of them: 1. Liquidity. You see, Bitcoin started being traded for the first time on an exchange in 2010. In this way, liquidity improved (the speed at which it can be transferred between buyer and seller) and Bitcoin owners could start selling their coins at a faster rate with better value. 2. Supply vs Demand. A main influencer of value is supply vs demand. Bitcoin’s mining block HALVED in 2017, meaning that miners would suddenly earn half of the mining reward they’re used to (25 rather than the usual 50 coins), for their mining efforts - this makes it more valuable as it is becoming scarcer. Mining difficulty also increases and for many it is no longer profitable to mine the coins because of the high competition. 3. Use cases. As the number of use cases (ways to spend your Bictoin) increased, it was becoming easier and more convenient to use Bitcoin and in turn the demand and value increased. Although the price was hovering close to zero for three years, use cases played an important role for growth in value. 4. Mining block halving. Bitcoin’s mining block halves every four years. This means that on every fourth year, the reward payout to miners per block halves for the amount of coins being paid out as mining reward. Let’s look at the value of Bitcoin after each mining block half: Inception: 1 March 2009: Gensis block (50 new Bitcoins created every 10 minutes) Approx. Value: $0 First Halving: 28 November 2012 ( 25 new Bitcoins created every 10 minutes) Approx. Value: $10 Second Halving:7 September 2016 ( 12,5 Bitcoins created every 10 minutes) Approx. Value: $100 Third Halving: Mid 2020 ( 6,25 Bitcoins created every 10 minutes) Approx. Value: TBA
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