Bitcoin Halving – A Beginner’s Guide
By: Ofir Beigel | Last updated: 2/20/24
What is the Bitcoin halving? What does it mean? When does it happen? What happens to the value of Bitcoin when it does happen? In this post, I’ll answer these questions and more.
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Bitcoin Halving Summary
The reward granted to Bitcoin miners for adding a block to the blockchain is cut in half on average every four years (210,000 blocks). Satoshi Nakamoto implemented this halving to keep Bitcoin’s inflation in check.
Since the halving cuts the supply of newly created Bitcoin in half, many believe this event will dramatically affect Bitcoin’s price. Others believe anticipation of the event is already priced in, so no major price movement will happen. But who’s right?
That’s the Bitcoin halving in a nutshell. If you want a more detailed explanation of halving, keep on reading. Here’s what I’ll cover:
- What is the Bitcoin Halving?
- When is the Next Bitcoin Halving?
- The Halving’s Impact on Bitcoin’s Price
- Bitcoin Halving (FAQs)
- Conclusion: Recapping the Bitcoin Halving
When Satoshi Nakamoto set up the rules for the Bitcoin protocol, he stated two important things, among others:
- First, the supply of Bitcoin is finite and limited to 21 million.
- Second, the number of Bitcoin generated per block i.e., the reward, is set to decrease by 50% every 210,000 blocks.
Why should we even have a halving event?
Why not keep the reward the same? Why the change? Isn’t that unfair to the miners? The answer to these questions lies in the law of supply and demand.
If the coins are created too quickly, or there’s no end to the number of bitcoins that can be created, eventually, there will be so many bitcoins in circulation that they will have very little value.
“The main reason why this is done is to keep inflation under control.
One of the major faults of traditional, “fiat”, currencies controlled by central banks is that the banks can print as much of the currency as they want, and if they print too much, the laws of supply and demand ensure that the value of the currency starts dropping quickly.
Bitcoin, on the other hand, is intended to simulate a commodity, like gold. There is only a limited amount of gold in the world, and with every gram of gold that is mined, the gold that still remains becomes harder and harder to extract.
As a result of this limited supply, gold has maintained its value as an international medium of exchange and store of value for over six thousand years, and the hope is that Bitcoin will do the same.”
How long does it take for Bitcoin to be halved?
Since 6 blocks are mined on average within an hour (~ every 10 minutes each) and halving happens once every 210,000 blocks, there will be a halving event every 4 years (give or take).
This means that the mining reward will be reduced by 50% from before the halving. For example, if each miner receives 6.25 bitcoins for solving a block today, they will receive only 3.125 bitcoins after the next halving event.
Of course, the fact that 21 million is the maximum amount of Bitcoin that will ever be generated doesn’t mean that there are actually 21 million bitcoins set to be in circulation. We need to consider that there are many lost bitcoins that will never be recovered (it’s assumed that 30% of Bitcoin’s supply, or 6 million BTC, is permanently lost).
James Howells from the UK reportedly lost 8,000 Bitcoin on a hard drive that’s in a landfill. He’s been battling with the government for 10 years to be allowed to search for it. He’s now wanting to use an AI-powered conveyor belt to help search through the garbage.
When were the previous Bitcoin halving events?
There have been three Bitcoin halving events, with the fourth event expected in April 2024.
- The first halving event occurred on November 28, 2012 (UTC) at a block height of 210,000.
- The second halving event occurred on July 9, 2016 (UTC) at a block height of 420,000.
- The third halving event occurred on May 11, 2020 (UTC) at a block height of 630,000.
Since we know the average block generation time (~10 minutes), we can estimate that the next halving event should occur in April 2024.
Some websites show a countdown until the next halving event.
Having said that, some community members have noticed that, since the creation of Bitcoin, a new block has been created on average every 9 minutes and 20 seconds, not every 10 minutes as presumed. This is 7% faster than the presumed time of 10 minutes. Just something to ponder.
Of course, the main question people want to know is, “Will the halving affect Bitcoin’s price?” And the answer is – nobody knows.
But let’s look at the previous three Bitcoin halvings and what happened after each event.
On November 28, 2012, the first Bitcoin halving occurred when block 210,000 was mined. At the time, Bitcoin’s price was $13.42, and the halving didn’t seem to affect the price much. Indeed, Bitcoin’s price spiked to $230 shortly after, but many attribute that to the Cyprus bailout.
In 2016, a week after the second halving event on July 9, not much happened to the trading price of Bitcoin. While it was trading at around $650 at the time of the event, a week later, the price was about $675, so not much of a change, not right away, at least.
The third and most recent Bitcoin halving event occurred on May 11, 2020. On the day of the halving, Bitcoin was trading at over $8,500. For the following six months, it remained somewhat steady between $9,000 and $13,000. Then, in October 2020, the price took off, reaching a then-all-time high of over $60,000 six months later in April 2021.
Studying this history and anticipating future halvings, there are arguments in favor of two scenarios – either the price will rise, or nothing will change.
Some community members and theorists claim that the halving event is well-known and will not surprise anyone or cause a major change in Bitcoin’s price.
Others claim that because the supply of Bitcoin is limited, the price is bound to climb as demand increases. However, no one seems to think that the halving may lower the price of Bitcoin in any way. In fact, the price of Bitcoin has never plummeted or crashed following any halving event.
What year will the last Bitcoin be mined?
Following the halving math, the final number of bitcoins will be 20999999.9769, rounded to 21 million. This is expected in the year 2140.
Will Bitcoin mining ever end?
No. As long as Bitcoin exists, mining will be needed. Once all bitcoins are mined, the miners will continue to be compensated through transaction fees.
How many bitcoins are mined per day?
On average, 144 blocks are mined each day (24 hours a day * 60 minutes per hour / 10 minutes per block), divided by the current rate of 6.25, which means that 900 bitcoins are mined per day on average. This will again be cut in half after the next halving in April 2024.
Does Bitcoin halving increase price?
Going off the last three Bitcoin halvings, the price increased minimally at the time of the halving. However, there was always slow but substantial growth in the months/years after. Regarding the halving’s impact on price, one thing is for sure: the price of Bitcoin has never plummeted after a halving event.
Bitcoin was designed to be valuable. To support this, it needed to be scarce, so specific rules were planned and put into action at the outset.
There will only ever be a specific number of bitcoins (~21 million), and inflation is kept in check by slowing its distribution through halving.
I hope this gives you a better idea of the Bitcoin halving and why it’s an important feature of what gives Bitcoin its value.
You may still have some questions or comments. If so, just leave them in the comment section below.