Bitcoin is a peer-to-peer computer network that runs a decentralized digital money and has a finite number of 21 million coins that can ever be mined, unlike other currencies. It contains a mechanism called halving, which cuts the number of new Bitcoins generated per block by 50% every 210,000 blocks, or roughly every four years, to ensure that this supply is spread progressively and equally over time.

‍

A key occurrence for Bitcoin is the halving since it has an impact on its value proposition, security, and supply and demand dynamics. We will describe halving in this blog post, including what it is, how it operates, when it happens, and how it affects the price of Bitcoin.

‍

What Happens When Bitcoin Halving?

Proof-of-work (PoW) is a technique that Bitcoin utilizes to authenticate transactions and add new blocks to its blockchain. PoW demands that miners use their processing capacity to solve challenging mathematical puzzles. Each block has a unique solution, and the first miner to discover it is rewarded with newly mined Bitcoins. This payment encourages miners to protect the network and carry out transactions.

‍

The award is not set in stone, though. Every 210,000 blocks, or roughly every four years, it is planned to decrease by half. This implies that every four years, there are 50% fewer new Bitcoins entering the market every block. This method is referred to as halving or halvening.

‍

The halving guarantees a limited and predictable supply of new Bitcoins, preserving its rarity and worth over time. Additionally, it stops coin dilution and inflation. The network becomes more secure and resistant to attacks as a result of the halving, which also raises the cost and difficulty of mining.

‍

When does the Bitcoin price halve?

The unidentified person who created Bitcoin, Satoshi Nakamoto, mined the first Bitcoin block on January 3rd, 2009, known as the genesis block. 50 Bitcoins were awarded as the initial block reward. There have been three halvings since then:

‍

• Block 210,000 saw the first halving on November 28, 2012. A 25-Bitcoin block reward has replaced the previous 50 Bitcoin block reward.
• Block 420,000 saw the second halving on July 9th, 2016. From 25 Bitcoins per block to 12.5 Bitcoins per block, the block reward was decreased.
• Block 630,000 had the third halving on May 11, 2020. 6.25 Bitcoins instead of 12.5 Bitcoins were given as the block reward.

At block 840,000, the subsequent halving is anticipated to take place in April or May 2024. 3.125 Bitcoins per block instead of 6.25 Bitcoins will be the new block reward. When there are 21 million Bitcoins in circulation, the final halving is anticipated to take place in 2140.

‍

‍

How Does the Price of Bitcoin Affect the Halving of Bitcoin?

By altering the market’s supply and demand dynamics, the halving has an impact on the price of Bitcoin. The halving lowers the quantity of new supply by lowering the rate at which new Bitcoins are produced. This produces a scarcity effect that may boost Bitcoin’s demand and value.

Historically, the halving has been followed by significant price increases in the months and years after the event. For example:

• After the first halving in 2012, the price of Bitcoin increased from $12 to $1,000 in one year.
• After the second halving in 2016, the price of Bitcoin increased from $650 to $20,000 in one year and a half.
• After the third halving in 2020, the price of Bitcoin increased from $8,800 to $60,000 in one year.

‍

‍

Conclusion

The main architectural element of Bitcoin that guarantees its restricted and predictable supply, its scarcity, and its value over time is its halving. By changing the market’s supply and demand dynamics, it also has an impact on its security and pricing dynamics.

‍

The next block reward halving is anticipated to take place in 2024, when it will decrease from 6.25 Bitcoins to 3.125 Bitcoins per block. As a result, the annual inflation rate for Bitcoin will drop from about 1.8% to about 0.9%.

‍

Long-term price increases have been linked to the past price halvings, but there is no assurance that this trend will hold in the future. Many variables outside of the halving’s control affect the price of Bitcoin.

‍

The best way to approach the halving is to be aware of its effects, but not to rely on them to determine Bitcoin’s price alone. Instead, one should concentrate on Bitcoin’s fundamentals and long-term goals as a decentralized, censorship-resistant, and reliable form of global payment.