Find out why bitcoin halving is on the mind of bitcoin enthusiasts everywhere.
You may have heard others talking about bitcoin halving if you're relatively new to cryptocurrency. While it sounds somewhat ominous initially, it's quite an interesting approach to bootstrap and grow the network over time to be self-sufficient while maintaining a fixed total of bitcoin in the long run.
What is Bitcoin Halving?
The bitcoin network finds a new block approximately every ten minutes. Each time a new block is found and added to the chain, a reward is given to the miner that completed the task before anyone else. Every 210,000 blocks, roughly every four years, the reward is given to the lucky miner that solves a block is halved. The primary goal is to result in a fixed cap on the bitcoin supply once the reward finally reaches zero.
When Was the Most Recent Bitcoin Halving?
At the time of writing, the most recent halving occurred on 12th May 2020. At the time, bitcoin was trading around $9,000 USD. This event celebrated the mining of 630,000 blocks and was the third bitcoin halving. The reward per block has stood at 6.25 BTC, with the next halving due in 2024.
History of Bitcoin Halvings
Back in 2009, when the genesis block was mined on the bitcoin network by Satoshi, the block reward started at 50 BTC. So around every 10 minutes, 50 new bitcoin entered the circulating supply. The first halving occurred roughly four years ahead, on the 28th of November 2012, when this was reduced to 25 BTC per block.
While it’s easy to get distracted by the block reward when talking about bitcoin halving, what is also interesting to pay attention to is the total new bitcoin created during each of these cycles between halving events halves as well. Before the first halving occurred, 10.5 million bitcoin were mined, around half of the total bitcoin supply.
When we hit the fifth halving event (expected to be sometime in 2028), the number of bitcoin to be created is estimated only to be around 328,000, a considerable reduction from earlier emissions between earlier halvings. At this time, the block reward will only be about 1.5 BTC. How much will this kind of reduction affect bitcoin price and miner support? Only time will tell.
When Will Bitcoin Halvings Stop?
As the supply of bitcoin is capped at 21 million, the last bitcoin is expected to be mined in the year 2140. At this point, it’s hoped that the network will be strong enough to rely on transaction fees alone to incentivize miners to continue securing the network. So while 2140 does feel like a long way away, we’ll likely start to see the effects of this changing dynamic far sooner as rewards reach far lower levers with more time.
Future network upgrades may end up affecting this, but as yet, no changes have been proposed that would do this have gained any traction or significant support.
How Do Halvings Affect Bitcoin Miners?
As the reward drops for finding a new block, miners are forced to be as competitive as possible to remain profitable. One of the ways that people do this is by participating in mining pools, as mining on your own these days is difficult, especially if you only own one or a few miners, as the odds of finding blocks are reduced. In addition, you don’t get a share in the reward as you are participating on your own if you don’t find it yourself.
While there’s always speculation that each bitcoin halving will put off miners, the result so far has ended up being that after the smoke clears, the network continues to strengthen. Furthermore, over the years, halving events have often been associated with a bullish cycle for bitcoin price. Whether this is due to the reduction in bitcoin being sold into the open market by miners or something else, it’s difficult to say but intriguing to consider and observe.
Do I Have to Do Anything?
Unlike some cryptocurrency events such as chain swaps or launching a mainnet of a new project, nothing is required of you as a bitcoin holder during a halving. The event takes place seamlessly and should have no significant impact on you. For the average bitcoin user, halvings are an interesting curiosity and something to celebrate as they make great markers for the network’s continued progress and lengthening of the bitcoin blockchain.