What is Bitcoin Halving

Bitcoin’s network reduces the number of new bitcoins awarded to miners approximately every four years by 50%. This event is called a Bitcoin halving.

What is Bitcoin? What is the Bitcoin network?

While central banks decide the supply of fiat currency through monetary policy and can increase or decrease the supply under different circumstances, the supply of Bitcoin is predetermined by the Bitcoin algorithm, which is written into the Bitcoin code and cannot be changed.

There is only one way to issue new bitcoins—block rewards. The Bitcoin network introduces new bitcoins into circulation by rewarding miners who process and record transactions with Bitcoin.

What is a block reward? How to earn a block reward? Please refer to the “What is Mining” section.

Every time 210,000 blocks are mined, or approximately every four years, the block reward for processing transactions for Bitcoin miners is halved. For example, initially, miners who mined a new block would receive 50 new bitcoins; during the first halving, this was reduced to 25.

The first Bitcoin halving occurred on November 28, 2012. At that time, the number of bitcoins in circulation had already reached half of the total—10.5 million.

The second halving was on July 9, 2016, and the most recent halving was on May 11, 2020. The next Bitcoin halving is expected to occur around May 19, 2024.

There will be a total of 32 Bitcoin halving events. The last halving will occur in 2140. After the 32nd halving, no new bitcoins will be created because the maximum supply of 21 million will have been reached. After that, there will be no more block rewards. Miners will only be rewarded through transaction fees.

Currently, over 19 million bitcoins have been issued (more than 90% of the total).

Based on block rewards, Bitcoin’s inflation rate was 50% in 2011, but after the first halving in 2012, it dropped sharply to 12%. The third halving in 2016 reduced it to 4-5%. Its current inflation rate is 1.77%.

Historically, each halving event has led to a Bitcoin bull market. When the block reward halves, Bitcoin’s inflation rate decreases, meaning fewer new bitcoins are available for sale. Assuming demand remains unchanged, Bitcoin halving will directly lead to an increase in the price of each bitcoin.

After each Bitcoin halving, miners may transfer their mining hash power away from the Bitcoin network because their rewards are halved, assuming Bitcoin’s price remains unchanged. Fewer miners mean a less secure Bitcoin network.

However, Bitcoin’s price usually rises by more than 50% after each halving, which more than compensates for the reduction in mining rewards. Therefore, the number of Bitcoin miners has not been affected by halving. On the contrary, as Bitcoin’s price increases, despite the reduction in rewards per block, mining remains profitable, and the number of miners often increases. However, this situation may not hold in future halvings. **$BTC **$IOST