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If you’ve skimmed through CT (Crypto Twitter), crypto news sites and YouTube videos, or a crypto-centric newsletter, chances are you’ve come across the term Bitcoin halving. Not yet? Go back and have a look.
Halving Is Coming! 🙂
For perspective, the graph below shows the interest in the term ‘Bitcoin Having’ from Google Trends over the past year (you could say, it’s done a 6x!).
Source: Google Trends
As we head towards the actual date of the halving, these echoes are only bound to grow, so we’re hoping to bring in some clarity around the concept.
In this primer, we’ll strip down the complexities of the Bitcoin halving — in essence, bringing out the what, why, how, and when around it.
🤔 So what is the Bitcoin halving?
Let’s put the Bitcoin halving into a context closer to everyday life.
Imagine you’re a fan of a limited series of comic books 🦸♀️. The publisher announces that they will release exactly 100 copies of a new issue each year. Obviously, that creates a buzz among collectors and fans like you to get hold of one. Demand grows. Now, the publisher announces a twist: after each year, they will produce only half as many copies for the next release. So, the next year, they release 50, then 25, and so on. (Don’t ask us how they will publish 12.5 copies 😄. You get the idea). So, the publisher is basically “halving” the supply. What does this do? It makes the comic books more rare and potentially more valuable over time, as there are fewer new ones available with each passing year. Think scarcity!
The Bitcoin halving follows a similar principle — in this case, however, it has been set in advance and remains immutable (unlike with comic books publisher, who could decide to go back on their halving). The halving is an event that’s been inscribed into the DNA of Bitcoin. It’s an event that happens every 210,000 blocks (if that sounds strange, here’s our glossary for some basics), or roughly every four years, where the number of new bitcoins created and earned by miners as rewards is cut in half.
Putting that into context,
- when bitcoin was first mined in 2009, 50 BTC were awarded per block as a reward.
- After the first halving in November 2012, that number was reduced to 25 BTC per block.
- In July 2016, that value was halved again to 12.5 BTC per block.
- Bitcoin’s last halving was on May 11, 2020, resulting in a block reward of 6.25 BTC.
The halving is simply a reduction, by half, of the reward for mining a block. Any guesses on what the upcoming halving will do to the rewards? 🙂 (Yup. 3.125 Bitcoin).
Note: There is a finite number of bitcoin that will ever be available - 21 million bitcoin, and that limit is expected to be reached in the year 2140.
🔎 Why have a Bitcoin halving?
Think economics! The “halving” limits the supply of new bitcoins, ensuring that the total supply will reach its upper limit more gradually. It is a key mechanism to control the supply of new Bitcoin entering circulation.
What’s been the one big criticism of FIAT money? Some would say, the limitless printing by Central banks, and the resulting inflation.
Bitcoin, on the other hand, thanks to the limited cap of 21 million Bitcoin only, and with the halving putting limits on the amount of new Bitcoin that enters the system, has little monetary inflation, that will drop even further.
If you want to delve further into the economics of Bitcoin, this makes an interesting read,
The Economics of Halving: What Will Happen to the Price?
❓ FAQs about Bitcoin halving
- What is a Bitcoin halving?
A Bitcoin halving is an event that occurs approximately every four years, where the reward for mining new Bitcoin blocks is cut in half. This reduces the rate at which new bitcoins are created and, over time, limits the total supply of bitcoins that will ever be in circulation. - Why does Bitcoin have halvings?
Halvings are a part of Bitcoin’s DNA, embedded in its code by Satoshi Nakamoto, the creator of Bitcoin. Think of it as part of Bitcoin’s monetary policy. The purpose is to create a controlled and decreasing supply of new tokens over time, mimicking the extraction of precious metals like gold, for example. This event serves to control inflation. - Does halving affect the value / price of Bitcoin?
Historically, halvings tend to put Bitcoin’s scarcity in the limelight. It is important to note though that many factors influence Bitcoin’s value. Again, this article can help explain the economics behind Bitcoin and the halving event. - Will my existing Bitcoins be halved or reduced when a halving occurs?
No, the Bitcoins you currently hold in your wallet will not be halved or reduced. The halving only affects the rewards for Bitcoin miners. - Does Bitcoin halving affect transaction fees or processing times?
Bitcoin halving itself does not directly affect transaction fees or processing times. - Can I track the date of the upcoming Bitcoin halving?
The timing of a Bitcoin halving is not based on a specific calendar date but on the number of blocks mined. It occurs every 210,000 blocks, which roughly translates to every four years. Here's a resource from Blockchair on tracking the Bitcoin halving.
🎉 Get ready! We're gearing up to launch an exclusive page dedicated to the Bitcoin halving. Stay tuned to our social channels for the big reveal! 🎉
Understanding Bitcoin Halving: A beginner’s guide was originally published in Trezor Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.