Bitcoin halving is undoubtedly a term that most people interested in cryptocurrencies have heard of before. It remains one of the most anticipated events for the many that have a vested interest in Bitcoin and is an enormously important part of the overall system.
The previous Bitcoin halving event occurred during May of 2020, where the number of Bitcoin being added to circulation every 10 minutes or so was dropped by exactly half. In 2020, that meant that the number of block rewards went from 12.5 to 6.25. This was an event that was anticipated for a long time due to the fact that Bitcoin halving occurs every four years, or every 210,000 blocks. Before 2020, it had only occurred twice before, and is expected to happen again in 2024.
There are a lot of reasons that this event draws so much attention, but one of the biggest allures is the chance of diving into the market just after a halving when the chance of making a higher ROI is the highest. Another reason that so many welcome the event is because the value of Bitcoin continues to rise but demand remains stable. It’s also a time when there’s a lot of passionate debate taking place, especially in terms of how the market will respond to the halving and how it might affect the overall value of Bitcoin.
Some believe that halving events will have a much more prominent impact later down the line when we consider that one day, the rewards will eventually hit zero, even if this is still decades ahead. It’s theorised that as we get closer to zero and Bitcoin’s halving is within fractional limits, it might upend the system in its entirety – but hopefully this comprehensive Bitcoin guide will help those interested to determine whether Bitcoin is still worth the time and money or not.
Cryptocurrencies have become a normal part of the modern mainstream, but there are still many people out there that are not completely sure how they work. As Bitcoin is the first cryptocurrency, it’s also the best one to gain a foundational understanding of cryptocurrencies, even if they tend to differ in how they are created.
The technology that powers cryptocurrencies like Bitcoin is the blockchain. Blockchain is little more than a digital and distributed ledger, or a database that stores certain data which is shared among many people. Encryption is used to secure the data that can be found in the blockchain, ensuring that nobody is able to temper with it in any way. When a transaction takes place, the information from the previous block is then forwarded to a new block, along with new information that’s encrypted. The transaction is verified by validators – in this case, by using a process called Bitcoin mining. Once the transaction has been verified, a new block is created, along with a new Bitcoin, and is then given as a reward to the miner that was able to verify the data. Once acquired, they can hold on to it in a wallet, use it to pay for goods or services, or sell it for a certain amount of money.
All transactions are added to a queue, where they will need to be validated by the miners that are a part of the network. All the miners that participate in the network must try and verify the same transaction at the same time. This is where hardware comes into play, and why it’s no longer feasible to use a personal home computer for any kind of real Bitcoin mining. Today, Bitcoin miners make use of vast, powerful ASIC mining arrays that can compute enormous amounts of numbers in a short amount of time. The block header is randomly generated by the miner over and over until it meets a specific target number that’s chosen by the blockchain. Once this is completed, the block header is marked as solved, and a new block is created for more transactions to be verified.
The software that was the initial foundation of Bitcoin was created by Satoshi Nakamoto. No one is sure whether this was an individual or a group of people, as even the name itself is a pseudonym. Around a year after the software was released, Nakamoto disappeared and hasn’t been heard from since. That means that even cryptocurrency experts are not completely sure why the original plan of halving Bitcoin was put into place, but there are some bits of information left behind in emails that were sent by the mysterious Nakamoto.
Not long after the Bitcoin white paper was first released, Nakamoto offered a summary of the different ways their new monetary system would work, specifically regarding the schedule in which the miners would receive block rewards. The summary also included speculation on inflation and deflation, and how it would affect the currency on a wider basis. At the time of the release of the white paper, Nakamoto could never have known just how many people would eventually come to adopt the technology, and how many Bitcoins would enter circulation. It’s important to remember that while technically a currency, Bitcoin does not operate within the same paradigms as the currencies of most countries. State-issued currencies are tightly controlled by governmental agencies, but they are still susceptible to major fluxes in the market, meaning that there’s a certain level of unpredictability inherent to most currencies.
Bitcoin was designed around having a fixed supply and an inflation schedule that was entirely predictable, which are two of the main reasons that it differs from other currencies like the Dollar or Euro. This predetermined supply creates scarcity, and this scarcity ensures that the coins can hold their value.
Another major reason that Bitcoin is different is that it was programmed from the start to have the block rewards decrease over set periods of time. While there’s no definitive proof, it appears as though Nakamoto created Bitcoin for largely political reasons.
The very first Bitcoin block that was released featuring the headline of a newspaper article that read, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” Many have come to believe that this is a statement of the political beliefs of Nakamoto, mainly that if Bitcoin were to be adopted across the world, it would potentially take power away from governments and banks, and rather put it in the hands of the average person.
The block reward is a way to ensure that there is no central authority that’s able to put more Bitcoins into the market, and that it must abide by the strict schedule no matter what.
At the time that Bitcoin was launched in 2009, miners were getting 50 BTC per block. That means that until the first halving, there were a total of 10,500,000 coins. The first halving took place during the month of November in 2012, and from that point onward, miners were receiving half of the initial amount, equalling 25 BTC for a single block.
Based on the current value of blocks, the genesis blockchain would have had blocks valued at almost $400,000 each. But because the network was only in its infancy at the time and not many people had the kind of hardware to mine a lot of it, its value wasn’t fully realised.
BTC hit a high price at the time (2011), where it was being sold for just $31 each. It was a lot of money for a concept that wasn’t really that well developed, and it didn’t take long for the bubble to burst and the price of Bitcoin to drop down to just $2 by the time the year had come to an end. This is a big part of the reason that so many early investors were able to make big money, and why so many people have called cryptocurrencies a Ponzi scheme.
Another halving took place on the 6th of July 2016, with the block number being 420,000. Miners began collecting 12.5 Bitcoins for every newly generated block. Once more in 2020 a halving occurred, and BTC per block went down to 6.25.
There’s a real worry that the constant decreasing every four years might one day become a problem. Miners are incentivised to carry on their operations to make a profit. After all, it’s not the easiest job in the world to set up a large mining array and pay a very high electricity bill. Eventually, the block rewards will dwindle until they hit zero.
Transaction fees are another important way in which miners can make money, which is why it’s believed that as the BTC rates continue to fall with each halving, more and more miners will have to rely on the fees from transactions in order to make any money. Many experts agree with this opinion, and it’s believed that in around 20 years or so, transaction fees will be so important that transactions below a certain threshold won’t even be considered.
Others feel that transactions simply won’t be enough to maintain the incentive at all, and that relying on transactions will ultimately see the whole network begin to fall apart. The long-term unsustainability of the Bitcoin halving process is a large part of the reason that a new type of blockchain was implemented using proof-of-stake rather than proof-of-work.
Another important factor to consider is that the security of the Bitcoin blockchain has long come under scrutiny, with many believing that the blockchain’s security is not enough to truly keep attackers at bay, and this problem will only get worse as more halving events occur. No major attacks have taken place, however. But as it continues to gain popularity around the world, it’s believed that the chances of attack increases. Of course, it’s also important to keep in mind that we are more than 100 years from when the last halving is expected to take place, which means that we still have plenty of breathing room to sort out some of the more prevalent issues.
At the moment, around 89% of all BTC that exist have been mined are currently in circulation. This equates to around 18.5 million in total, and each day, around 900 new Bitcoins are mined and then added to the network. The number tends to fluctuate depending on the number of miners that are participating. As more halvings occur, the supply of Bitcoin will slow until all 21 million have completely been mined, which is expected to happen in 2140.
While there is no specific date that the next halving is expected to occur, it will take place when the 210,000th block has been mined. We do know that Bitcoin halving happens every four years, so the next halving is expected to occur in early 2024, and payouts for miners will drop from the current 6.25 to 3.125 BTC.
Bitcoin halving is a fundamental part of this cryptocurrency and is expected to happen over the next century. A halving event is cause for great excitement within the crypto community and will see the value of Bitcoin block rewards drop by half every time.
Leading up to the halving, the value of Bitcoin is generally expected to rise, after which it drops down somewhat. This rise and fall are important for investors who are wanting to maximise the overall profit potential, and it’s a large part of the reason of why so many investors keep a very close eye on the value of BTC during this period. This Bitcoin guide to BTC halving should always be kept close by as a reference to how the halving event functions and how it’s expected to change over the next few decades.
BTC halving cuts the Bitcoin mining reward by 50%. This means that less Bitcoin enters the market and miners earn less for each block mined but demand and price of BTC increase.
Bitcoin halving takes place every 210,000 mined blocks or about every four years.
In most cases the price of BTC increases after a halving event.
Generally, miners receive 50% less after a halving event occurs.
