Introduction
Bitcoin halving refers to an event that occurs approximately every four years in the Bitcoin network. It is a built-in mechanism designed to control the supply of new bitcoins being created and ensure a limited and predictable inflation rate.
During a Bitcoin halving, the reward that miners receive for successfully mining a new block is reduced by half. This reduction in the block reward has a direct impact on the rate at which new bitcoins are introduced into circulation. The aim of this process is to gradually decrease the rate of supply growth and reach the maximum supply of 21 million bitcoins, which is a fundamental characteristic of Bitcoin.
The first Bitcoin halving occurred in 2012, reducing the block reward from 50 bitcoins to 25 bitcoins. The second halving took place in 2016, reducing the block reward to 12.5 bitcoins. The most recent halving occurred in May 2020, cutting the block reward to 6.25 bitcoins.
The halving events are significant because they affect the economics and dynamics of the Bitcoin ecosystem. With each halving, the supply of new bitcoins entering the market decreases, which, assuming demand remains constant or increases, can lead to upward pressure on the price of Bitcoin. Historically, Bitcoin halvings have been associated with price rallies and increased market attention.
