Bitcoin halving is an event that occurs approximately every four years within the Bitcoin network. It involves a reduction in the reward that miners receive for verifying transactions and adding new blocks to the blockchain. Initially, when Bitcoin was created, the block reward for miners was 50 bitcoins. However, roughly every four years, this reward is halved.
For example, the first Bitcoin halving in 2012 reduced the block reward from 50 bitcoins to 25 bitcoins per block. The second halving occurred in 2016, reducing the reward to 12.5 bitcoins per block. Subsequently, the third halving occurred in 2020, reducing the reward to 6.25 bitcoins per block. The next halving is expected to occur in April 2024, when the block reward will fall to 3.125. Over time, the impact of each halving will diminish as the block reward approaches one satoshi.
What is the purpose of Bitcoin halving?
The purpose of halving is to control the issuance rate of new bitcoins, making it more scarce over time. This mechanism is built into the Bitcoin protocol and serves to limit the total supply of bitcoins to 21 million, creating scarcity and potentially impacting the value of Bitcoin due to its fixed supply and increasing demand. The halving event is significant because it marks another drop in the rate of new Bitcoins produced as it approaches its finite supply. In 2009, the reward for each block in the chain mined was 50 bitcoins. As of October 2023, about 19.5 million bitcoins were in circulation, leaving just around 1.5 million to be released via mining rewards.
There have been three halvings as of January 2024:
- Nov. 28, 2012, to 25 bitcoins
- July 9, 2016, to 12.5 bitcoins
- May 11, 2020, to 6.25 bitcoins
Note
A Bitcoin halving cuts the rate at which new bitcoins are released into circulation in half. The rewards system is expected to continue until the year 2140 when the proposed limit of 21 million bitcoin is theoretically reached.
Article Sources
Bitcoin Project. “Bitcoin: A Peer-to-Peer Electronic Cash System“
Bitcoin Project. “Frequently Asked Questions,” Select “Mining.”
CoinMarketCap. “Bitcoin
Investopedia. “Bitcoin halving“
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