Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

What is the best description of block halving?

1. When new cryptocurrency coin issuance is reduced by half.

2. When block size is reduced by half, allowing fewer transactions.

3. When the price of cryptocurrency is reduced by half.

4. When blockchain is forked into two separate blockchains.

The correct answer is: When new cryptocurrency coin issuance is reduced by half.

Block halving is best described as an event where the reward for mining new blocks is reduced by half. This process occurs at predetermined intervals within certain cryptocurrencies, such as Bitcoin. It aims to control the rate of coin issuance and ultimately the total supply of the coin. By reducing the reward, block halving effectively decreases the rate at which new coins are created, which can influence the market dynamics and potentially impact the price of the cryptocurrency over time. In contrast, the other options do not correctly define block halving. For example, the notion of block size being reduced pertains to transaction capacity within a block rather than the reduction of coin issuance. The statement about the price of cryptocurrency being reduced pertains to market fluctuations and not to the mechanics of the blockchain ecosystem. Lastly, forking refers to creating a new version of the blockchain that operates independently from the original, which is unrelated to the concept of halving reward structures. Each of these points illustrates why the correct choice accurately captures the essence of block halving in the context of cryptocurrency mining and supply management.