Tutorials:Summary / Check Point

Summary / Check Point

Proof of Work mining solves three important problems in Bitcoin:

1. It is a fair way to distribute cryptocurrency among market participants.
2. It rewards the nodes that contribute to the functioning of the network.
3. By using energy in the process, it creates a physical barrier for attackers who might attempt a 51% attack on the network.

Proof of Work effectively converts energy into currency.  

Proof of work removes the need for a trusted mint or central bank to issue the currency. If the system relied on human laws, goodwill, altruism, or any other form of agreement, it would be less secure.

The Halving Effect

• The Bitcoin reward for mining a new block is halved every 4 years.
• This event doubles the cost of production overnight, creating sudden scarcity in the system.
• The resulting scarcity typically drives prices higher, initiating a bull market.
• Price speculation often amplifies this movement, leading to all-time highs and eventually resolving in a price bubble that bursts, leading to a prolonged bear market.

Exercise:

Go back to the log price history chart and review the halving dates.