What Is The Bitcoin Halving

What is the Bitcoin Halving?
How Bitcoin's Supply is

Limited
Every four years, the amount of Bitcoin awarded to miners is
halved, an event known as the Bitcoin halving.
In brief
 The Bitcoin halving is an event where mining rewards are cut in half.
 The event takes place every four years, according to pre-set rules in
Bitcoin's code.
Every four years, the amount of Bitcoin doled out to cryptocurrency miners
halves, in a process imaginatively known as the Bitcoin halving (or
halvening). Here’s why—and how—it works.
Bitcoin’s supply limit

To understand the Bitcoin halving, we must first understand the theory
behind Bitcoin’s supply.
The inventor of Bitcoin, Satoshi Nakamoto, believed that scarcity could

create value where there was none before. After all, there’s only one Mona
Lisa, only so many Picassos, a limited supply of gold on Earth.
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Bitcoin was revolutionary in that it could, for the first time, make a digital
product scarce; there will only ever be 21 million Bitcoin.
The idea of limiting Bitcoin’s supply stands in marked opposition to how fiat
currencies such as the U.S. dollar work. Fiat currencies such as the U.S.
dollar were initially created with firm rules–to create one U.S. dollar, the
U.S. government needed to have a certain amount of gold in their reserves.
This was known as the gold standard.
Over time, these rules eroded as modernizing economies, during bouts of

extreme financial certainty–like the Great Depression and World War II–
printed more money to help stimulate struggling economies. Over time,
these rules evolved into today’s system, in which governments can (broadly
speaking) print money as often as they like.
Satoshi Nakamoto believed that this devaluation of fiat money could have
disastrous effects, and so, with code, prevented any single party from being
able to print more Bitcoin.
What is the Bitcoin halving?

Embedded in the Bitcoin code is a hard supply limit of 21 million coins. New
Bitcoin is released through mining as block rewards. Miners do the work of
maintaining and securing the Bitcoin ledger; as a reward, they receive newly
minted Bitcoin.
However, about every four years, the reward for mining is halved–hence
“the halving.” Each halving reduces the rate of new Bitcoin entering into the
supply, until no more new Bitcoin is created at all in the year 2140.
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A brief history
 2009 – Bitcoin mining rewards start at 50 BTC per block
 2012 – The first Bitcoin halving reduces mining rewards to 25 BTC
 2016 – In the second halving, mining rewards go down to 12.5 BTC
 2020 – In the third halving, mining rewards drop to 6.25 BTC
 2140 – The 64th and last halving occurs and no new Bitcoin will ever
be created
What’s so special about the halving?

If a person, group, or government is trusted to set up the money supply,
they must also be trusted to not mess with it. Bitcoin is supposed to be
decentralized and trustless–no one in control and no one to trust. Since
Bitcoin is not controlled by any one person or group, there must be hard and
set rules about how many Bitcoin gets created and how they are released.
By writing a total supply and halving event into the Bitcoin code, the
monetary system of Bitcoin is essentially set in stone and practically
impossible to change. This “hard cap” means Bitcoin is a kind of “hard
money” like gold, which has a total supply that is also practically impossible
to change.
What happens to Bitcoin miners?

Bitcoin miners invest money in specialized mining hardware as well as the
electricity required to run their rigs. The cost of this is offset by their mining
rewards—but what happens when their rewards are halved?
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Since the halving reduces mining rewards, the incentive for miners to work
on the Bitcoin network is also reduced over time, leading to fewer miners
and less security for the network.
For this reason, once the last Bitcoin is mined, miners will (assuming there
haven’t been any major changes to the Bitcoin protocol) receive rewards in
the form of transaction fees for maintaining the Bitcoin network.
At present, transaction fees make up a small proportion of a miner’s

revenues; miners currently mint around 900 BTC (~$33.5 million) a day, but
earn between 60 and 100 BTC ($2.2 million to $3.7 million) in transaction
fees each day. That means transaction fees currently make up as little as
6.5% of a miner’s revenue—but in 2140, that’ll shoot up to 100%.
"Transaction fees will likely grow in an inverse correlation to, and as a

compensation for, the diminishing mining returns," as per Ben Zhou, CEO of
crypto exchange.
It’s also possible that the reward mechanism for Bitcoin could change before
the final block is mined. Bitcoin currently runs on a proof of work consensus
mechanism, which has attracted criticism from the likes of Tesla CEO Elon
Musk for its high energy consumption and carbon footprint.
Rival cryptocurrency Ethereum is in the process of switching from proof of

work to the less energy-intensive proof of stake consensus mechanism, in
which the network is secured by having validators lock up, or “stake,” their
cryptocurrency.
It’s possible that Bitcoin could follow suit. In an interview originally shot for
German TV show Galileo, Niklas Nikolajsen, the founder of Swiss crypto
broker Bitcoin Suisse, was quoted as saying "I’m sure, once *proof of stake+
technology is proven, that Bitcoin will adapt to it as well."
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The halving’s impact on the price of Bitcoin
The debate over whether Bitcoin halvings impact on the cryptocurrency’s
price, or whether they’re already “priced in”, continues to rage.
According to the laws of supply and demand, the dwindling Bitcoin supply
should increase demand for Bitcoin, and would presumably push up prices.
One theory, known as the stock-to-flow model, calculates a ratio based on
the current supply of Bitcoin and how much is entering circulation, with
each halving (unsurprisingly) impacting on that ratio. However, others have
disputed the underlying assumptions upon which the theory is based.
Historically, after previous halving events, the price of Bitcoin has

increased—but not immediately, and other factors have played a part.
At the time of the June 2016 halving, the price of Bitcoin had was around
$660; following the halving, Bitcoin continued to trade horizontally until the
end of the month, before crashing to as low as $533 in August. But following
the crash, Bitcoin’s price shot up to its then all-time high of over $20,000 by
the end of the year, an increase of 2,916%.
Similarly, in the wake of the 2020 halving, Bitcoin’s price increased from just
over $9,000 to over $27,000 by the end of the year—but in the two months
following the halving the price failed to break $10,000. It’s also important to
note that other factors also influenced Bitcoin’s 2020 bull run, most notably
growing institutional investment from the likes of MicroStrategy, and
PayPal’s decision to enable its users to buy and hold Bitcoin.
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What Is The Bitcoin Halving

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What is the Bitcoin Halving?

How Bitcoin's Supply is

Bitcoin’s supply limit

The inventor of Bitcoin, Satoshi Nakamoto, believed that scarcity could

Over time, these rules eroded as modernizing economies, during bouts of

What is the Bitcoin halving?

What’s so special about the halving?

What happens to Bitcoin miners?

At present, transaction fees make up a small proportion of a miner’s

"Transaction fees will likely grow in an inverse correlation to, and as a

Rival cryptocurrency Ethereum is in the process of switching from proof of

Historically, after previous halving events, the price of Bitcoin has

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