Why Bitcoin’s halving is the future of decentralized finance
In the ever-evolving landscape of cryptocurrency and blockchain technology, few events are as significant as the Bitcoin (BTC) halving.
This remarkable event happens every four years, or every 210,000 blocks, and serves as the basic mechanism for halving the rewards for Bitcoin miners.
The first push event occurred in November 2012, when block rewards were reduced from 50 BTC per block to 25 BTC. The next halving is expected sometime in mid-April 2024, when block rewards will drop to 3.125 BTC.
Beyond its immediate impact on Bitcoin's supply dynamics, the semi-event will reverberate throughout the entire crypto ecosystem, including the decentralized finance (DeFi) realm.
Cointelegraph spoke to several experts in the DeFi space, from market analysts and Bitcoin-related business executives to advocates for the currency's adoption to find out what impact this could have on society.
Growing the market
At its core, the DeFi philosophy aims to democratize access to financial services by creating open, permissionless and trustless financial systems using blockchain technology. As Bitcoin is a pioneering cryptocurrency, it plays a crucial role in shaping the ethos and infrastructure of DeFi.
Therefore, any event that affects Bitcoin's supply and market dynamics will inevitably affect the direction of DeFi.
Invest.Conotoxia.com market analyst Grzegorz Drozz told Cointelegraph that this halving will not only increase the value of Bitcoin, but also strengthen the entire crypto market. he said:
“As Bitcoin is an important part of the DeFi ecosystem, its value increase can attract more investment in DeFi platforms and projects, increasing their growth and adoption.”
He added that for the time being, Bitcoin's position is strengthening in relation to the entire cryptocurrency market and is reaching 54% of the market capitalization, adding that “this proves that the capital will first strengthen on the main cryptocurrency.” Only later can he move on to other projects.
Related: Bitcoin mining difficulty hits new all-time high due to halving
Variable cost and decentralization challenge
As Bitcoin scarcity increases, the spot has historically been seen as a continuation of the cryptocurrency's price appreciation. The rising price of BTC can act as a wave that lifts all boats, allowing investment in DeFi protocols and applications.
The reduced consumption of Bitcoin may affect its availability on decentralized exchanges (DEXs) and lending platforms, which are often used as collateral for various financial activities.
The lack of Bitcoin can indicate its utility as it can increase collateral and lead to loan volumes, pools, and farming strategies in the DeFi ecosystem.
Moreover, the Bitcoin halving serves as a litmus test for the resilience and adaptability of decentralized financial protocols.
As the cryptocurrency market experiences fluctuating supply and demand dynamics, DeFi platforms must innovate and iterate to accommodate changing market conditions.
“A project is either decentralized or it isn't,” says Joe Hull, a Bitcoin journalist and adoption advocate. he said:
“Bitcoin is clearly decentralized, but not all DeFi projects that claim to be in DeFi are far from it. I hope bitcoin's anti-corruption and predictable stance will show ‘DeFi' projects the true meaning of the word.
It attracts foreign attention
At each half, Bitcoin moves into the mainstream spotlight, if only for a moment, with mainstream media covering the event.
This moment can generate interest not only for new investors, but also for regulators and developers, which can lead to anything from pushing for stricter regulations in the DeFi space, but it can also spur innovation as developers work to create DeFi solutions that adapt to the evolution. Legal frameworks.
Hall is known for the crypto industry, which is commonly known to puzzle controllers, for the prediction of the event of something that can be done.
“Uncertainty is the hallmark of the 21st century in finance and politics, and Bitcoin's predictability will fuel demand.”
This idea is echoed by John Dennehy, founder of the Educational Project:
“The halving is one of the most visible examples of Bitcoin's predictability and decentralization – we all know it's going to happen, and one entity or group has no more power to change it than anyone else.”
Bitcoin's halving is not a magic bullet for the success of the cryptocurrency or the entire DeFi ecosystem. However, it serves as a major event that could play a role in shaping the future of the fast-growing area.
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