Why Have a Bitcoin Halving?
Bitcoin has a finite supply. There can only ever be a maximum of 21 million Bitcoins, and there are currently ~19.66m in circulation. The value of a Bitcoin, as with other assets, is determined by supply and demand.
Controlling the releases of the yet-to-be-mined coins helps to balance the supply and demand, as it prevents the market from being flooded by supply, instead providing a known supply constraint as demand increases over time. Three elements can be said to be at play with the Bitcoin Halving mechanism:
Avoids high levels of inflation by steadily reducing the quantity of new Bitcoins released over time.
Makes Bitcoin more scarce as time continues, because eventually, all the Bitcoin in existence will be in existence. This preserves its long-term value and further protects against inflation, a problem seen with fiat currencies throughout the world.
Maintains a supply of rewards, i.e., incentives, for miners to continue operating over a much longer period. Until around 2140.
Bitcoin Halving events will continue to happen approximately every four years until the last of Bitcoin’s maximum supply of 21 million has been mined. It’s estimated that all available BTC will be mined by 2140.
