What Is a Bitcoin Halving?
Bitcoin halvings reduce the rate at which new BTC is created by half. Halvings are an automatic process built into the network: they occur each time another 210,000 blocks are mined, which normally takes about four years.
When Satoshi Nakamoto created Bitcoin back in 2008, he realized he needed to release Bitcoin gradually into the market in order to prevent early adopters from hoarding it, which would have slowed adoption or even stopped most people from using Bitcoin at all.
After deciding to limit the supply to 21 million coins, Satoshi implemented a mechanism which would release BTC in a predictable way over time – every 210,000 blocks – which we call a ‘halving’.
Halvings mostly affects Bitcoin miners, who confirm Bitcoin transactions and add new blocks to the blockchain using computing power. The network rewards miners with Bitcoin for their work, which is how new Bitcoin is created.
After each halving, Bitcoin miners receive half as much Bitcoin for their services. This makes mining more competitive and encourages miners to source cheaper sources of fuel to power their operations.
It might seem illogical for miners to continue working for half as much profit; however, new bitcoins are scarcer after each halving, which should increase the value of each coin.
Indeed, price data shows that historically, Bitcoin does increase in value after each halving, thereby helping miners recover lost earnings. However, just because something has happened in the past doesn’t mean it’s guaranteed to do so in the future.
The Bitcoin mining reward will halve 32 times before Bitcoin’s full supply of 21 million coins will have been reached. This should happen by 2140. To date, 19,370,000 coins have been mined.
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Before the first halving, Bitcoin miners received an enormous block reward of 50 BTC per block. But as of May 2023, after three halvings, the block reward has been reduced to 6.25 BTC per block. Over time, the impact of each halving will diminish as the block reward approaches zero
