What is the Bitcoin Halving / Halvening?
Explainer
The Bitcoin halving, often referred to as the "halvening," is an event that occurs approximately every four years on the Bitcoin network. During a halving, the reward that miners receive for validating transactions and adding new blocks to the blockchain is cut in half.
This reduction in mining rewards is built into the Bitcoin protocol as a way to control the supply of new bitcoins entering circulation. The halving is an integral part of Bitcoin's monetary policy, designed to ensure scarcity and maintain the asset's value over time.
The specific mechanics of the Bitcoin halving are as follows:
Initially, when Bitcoin was launched in 2009, the block reward for miners was set at 50 bitcoins per block.
Approximately every four years, or after every 210,000 blocks are mined, the block reward is reduced by half. This means that after the first halving, which occurred in 2012, the block reward decreased from 50 bitcoins to 25 bitcoins per block.
Subsequent halvings have continued to occur at intervals of approximately four years. The second halving occurred in 2016, reducing the block reward from 25 bitcoins to 12.5 bitcoins per block. The third halving occurred in May 2020, further reducing the block reward to 6.25 bitcoins per block.
The process of halving will continue until the maximum supply of 21 million bitcoins is reached, which is expected to occur around the year 2140. Once this limit is reached, no new bitcoins will be created, and miners will rely solely on transaction fees for their rewards.
The Bitcoin halving is significant because it has a direct impact on the rate at which new bitcoins are introduced into circulation. By reducing the rate of supply growth, the halving is designed to counteract inflation and maintain the scarcity of Bitcoin, which is one of its key value propositions. Additionally, the halving event often generates increased attention and speculation in the cryptocurrency market, as investors anticipate its potential impact on Bitcoin's price.