Nervos CKB Layer 1 Halving Countdown

 

 

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What is a Halving Event?

In the Nervos ecosystem, mining is used to secure the network and distribute tokens in the form of block rewards. A total of 33.6 billion CKB tokens will be created through primary issuance over a period of approximately 84 years to incentivize the miners that secure the network.

Every epoch, a period of approximately four hours, a fixed amount of CKB is introduced. Every 8,760 epochs, a period of approximately four years, this amount is cut in half. This event is called a halving and it is the point where the mining rewards from primary issuance are permanently reduced by 50%. This halving process will continue every four years until the year 2103, after which point all block rewards from primary issuance will cease completely.

Nervos Halving Table

What is the Significance of a Halving?

Each time a halving occurs, it causes a sharp decrease in the rewards generated per block. The supply of new CKB entering circulation is lowered, dramatically reducing the rate of inflation. This is important because it creates a shift in the underlying market equilibrium and forces a reevaluation of what is considered fair market value.

Halving events occur on a predetermined issuance schedule that cannot be changed, postponed, or delayed. Investors and community members often look forward to a halving event as something to celebrate since it marks an important milestone in the history of the project.

Nervos CKB Inflation Rate Chart

How Could a Halving Affect the Price of CKB?

A general rule of thumb in economic theory states that steady demand with decreasing supply results in higher pricing. Bitcoin enthusiasts often use the stock-to-flow model as a way to measure the total amount of existing Bitcoin (stock) relative to the amount of Bitcoin produced per year (flow).

This stock-to-flow model predicts that a higher the stock-to-flow ratio will result in a higher the price of the asset. This model remains controversial among experts, especially for gauging short-term market sentiment. However, one look at Bitcoin's stock-to-flow chart leads many to believe the theory is worth further consideration.

Bitcoin Stock to Flow Chart