Bitcoin’s 2016 Halving: What is It and Why Should You Care?

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Soon a major event is going to happen in the Bitcoin ecosystem – The Block Halving. Although it may sound like a pagan ritual which includes the sacrificing of virgins and opening gateways to parallel worlds, the block halving event is real and it’s important.

Let me explain.

The supply of Bitcoin is finite

Whenever a miner solves a Bitcoin block he gets Bitcoins as a reward, that’s how Bitcoins come into this world. If you’re unfamiliar with Bitcoin mining this short video will get you up to speed:


When Satoshi Nakamoto set up the rules for the Bitcoin protocol he stated that the number of bitcoins generated per block is set to decrease geometrically (by 50%) every 210,000 blocks. Since 6 blocks are found on average within an hour and halving happens once every 210,000 blocks, this means that every 4 years (give or take) there will be a halving event.

This basically means that the reward the miners will be reduced to 50% of what it used to be. So if today each miner receives 25 Bitcoins for solving a block, after the halving event he will receive only 12.5BTC. Following this math, the final number of Bitcoins will be roughly 21 million(20999999.9769 to be exact) in the  year 2140.

Of course the fact that 21 million Bitcoins have been generated doesn’t mean that there are actually 21 million Bitcoins that can be spent. You need to take into account that there are many lost Bitcoins which will never be recovered (it’s assumed that 1/3 of the Bitcoins mined until today were lost).

Why should you even have a halving event?

“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.” ~ Vitalik Buterin, Bitcoin Magazine.

So when will the next halving occur?

Well, since we know the average block generation time (10 minutes) we can estimate that the next halving event should occur on July/August of 2016. There are websites such as BitcoinClock which show you a countdown until the next event.

[jcountdown timetext=”2016/7/9 19:30:39″ timezone=”11″ style=”flip” color=”black” width=”0″ textgroupspace=”22″ textspace=”0″ reflection=”true” reflectionopacity=”10″ reflectionblur=”0″ daytextnumber=”3″ displayday=”true” displayhour=”true” displayminute=”true” displaysecond=”true” displaylabel=”true” onfinishredirecturl=””]2016/7/9 19:30:39[/jcountdown]

Having said that, some community members have noticed that in fact, since the creation of Bitcoin, a new block has been created every 9 minutes and 20 seconds on average and not every 10 minutes as presumed. This is 7% faster than the presumed time of 10 minutes. Taking that into account,  the next halving will be on July 9, 2016.

How will the Bitcoin halving effect the bitcoin economy?

Of course the main question people want to know is “will this affect Bitcoin’s price?” and the answer is “nobody knows”. There are arguments in favour of two scenarios – either the price will rise, or nothing will change.

Some claim that the halving event is well known to the community and therefor will not surprise anyone or cause a major change in Bitcoin’s price. Others claim that due to shortage in “Bitcoin supply” the price is bound to climb as demand will increase. However no one seems to think that the halving may lower the price of Bitcoin in any way.

The same debate happened before the last Bitcoin halving in 2012 and nothing actually happened to the price. Of course back in 2012 Bitcoin was much less known to the general community.

On November 28th 2012 the first Bitcoin halving occurred when block 210,000 was solved. Back at the time Bitcoin’s price was $13.42 and the halving didn’t seem to effect the price that much. Shortly after Bitcoin’s price spiked to $230 but many attribute that to the Cyprus bailout.

Having said that I personally believe that Bitcoin hasn’t been that  widely adopted so such an event will have a significant effect on it’s price, what do you think?

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Ofir Beigel

Owner at 99 Coins ltd.
Blogger and owner of 99Bitcoins. I've been dealing with Bitcoin since the beginning of 2013 and it taught me a lesson in finance that I couldn't get anywhere else on the planet. I'm not a techie, I don't understand "Hashes" and "Protocols", I designed this website with people like myself in mind. My expertise is online marketing and I've dedicated a large portion of 99Bitcoins to Bitcoin marketing.

11 Comments

  1. I also think the price of Bitcoins would rise. If Bitcoins is a commodity like gold is, hence it being mined, let’s cast our minds back to the year 1324, when Mansa Musa I, of Mali made his pilgrimage to Mecca. This man gave out over 120k lbs of gold to the poor and traded some other tons of gold for souvenirs.

    His generosity is said to have “inadvertently” devalued the worth of gold in the cities he passed did charity in, for the next decade!

    Bottom line: The abundance of a commodity reduces it’s value, and vice versa.

    There will not exactly be an increase in price or a shortage in Bitcoins, because it will be miners who will find it hard to earn more Bitcoins as they used to (half of it). Should the prices rise, it will be the miners who will be demanding a premium over whatever the agreed-upon standard global value would be, which is also very unlikely to spike out of control because raising the value of control will not end up fulfilling the primary focus of preventing inflation.

  2. Now pardon my lack of education as I’m not as smart as some of you out there so if I seem out of touch you have to forgive my ignorance.

    I’ve been to and read bitcoin sites, blogs, news feeds, newsletters for the past few months and every single guy and his mom is basically saying that bitcoin is a sure bet. I mean it’s such a sure bet that these guys make it seem like it’s easy free money over the long term. I mean are there that many warren buffet types who have all come to the same conclusion? It’s really rare to see someone be positive on bitcoin yet negative on its price. What I mean is that bitcoin is still bitcoin at 1 dollar right? Or at 1000 dollars? If you halve the reward for miners they’re gonna have to mine harder or go outta business as I understand it. So if you cut the reward in half but bitcoin does not increase in price in direct proportion then you’ll have less supply and this could mean a rise in price? But demand is necessary too no? If there is limited supply but demand for the coin does not keep pace then prices will drop naturally. (But true bitcoin lovers don’t care about the price is that correct to say? Sorta like Vegans vs Vegetarian thing?) But if bitcoin start to fall and for some odd reason or two, say a meltdown in the financial markets or government passing horrendous sanctions on bitcoin in any which form, bitcoin demand starts to plummet then it will be a horrendous crash.

    Nobody is analyzing the miners or supply and demand in accounting type detail. What are miners break even costs? What is quarter for quarter supply and demand for bitcoin? What is the future demand for bitcoin 1 year out? What trends could be counter to bitcoin growth? At least stocks have an idiot like Jim Cramer talking to them but online there are literally hundreds of Cramers all saying the same thing because they are preaching to a get quick rich crowd. Reading the comments of most people on a plethora of blogs will confront you with people who only want to listen to the good and get extremely emotional about any negative news or educated predictions.

    In my opinion unless bitcoin drops hundreds of dollars (Which is an absolutely absurd amount in the bitcoin community. They deem it as impossible and even insulting to insist because of course they have money riding on this) and shows it’s mettle in the thick of things and overcomes soon to come government meddling of an order of magnitude we have yet to see then bitcoin is pure speculation and that’s fine we all have a right to speculate but just like lotto winners every man and his dog knows its a “sure bet”. My personal opinion is also that fools do rush in again and from a purely speculative perspective I do hope it drops and washes out thousands from the market from temporary routs and then shoots back up to 1000 dollars but the risk reward needs to be there. However if it doesn’t happen then I lose what I had specifically set aside (A relatively small amount) and move on.

    My take is this with the dollar becoming stronger, the reward cutting in half, the stock market getting a little fidgety but still paying dividends, bonds growing stronger, gold losing its value I see bitcoin being oversold to the extreme while still maintaining and increasing its value and yes this can happen. If coca cola dropped to 1 dollar in the worst financial crisis but you knew people still wanted coca cola would you buy it? Exactly.

    Just because I’m bearish on the price doesn’t mean I’m bearish on the future of it? Ya feel me?

  3. now in the EU bitcoin is legally money and does not get charged vat. (value added tax)
    The cost to mine bitcoins,will come down to price to mine and make profit.
    So where are the most miners?and cost of production?
    The latest hardware with most THs per watt.
    Do not over look some older machines that can be under clocked for power consumption.

  4. People are so out of touch….. Bitcoin will either be abolished or will increase to astronomical levels…. And with the US declairing it as a commodity, it is now labeled as something… So most likely, the entire wold will begin to hord and accumulate, and sidechains will replace the outdated and broken as well as broke finicial systems in place at this time. As the US collopse with their entire government and banking system people will utilize this as the future of trade… This is the next level and why banks are trying to develop what is already in place and going to crush them… So just begin to buy and hold, buy and hold…. You don’t spend gold so why would anyone use bitcoin as currency… It is a commodity and side chains with other currencies will be what is used for trading all backed by Bitcoin…

  5. I think bitcoin price is highly depend on dollar’s interest rate. If federal reserve decide to increase this rate, Bitcoin index price will decrease more.

  6. I’d have to disagree with Jackus.

    Miners are selling bitcoins all day every day to pay for their mining operations (theoretically mining is a commodity and therefore MC= MV and therefore should ‘theoretically’ be selling 25 btc every 10 mins).

    But leaving the theory behind, it goes to reason that inflation puts downward pressure on price as many of these bitcoins are instantly sold to support their mining operations (buying hardware and paying for electricity). Cut the inflation in half and you’ll have less downward pressure on price and should see the price rise.

    The effect I am referring to above will take place over a long duration of time, any immediate price moves are only the result of speculators jumping in and out.

    I think the effect here is quite large – and think the halving will have a big impact over time.

  7. It will have to rise, do to the high cost of electricity and Hardware..
    If it remains the same, there will be a lot of people/businesses that will be force to stop
    my 2 cents

  8. Jackus Blackus on

    “Others claim that due to shortage in “Bitcoin supply” the price is bound to climb as demand will increase.”

    While there might be reasons for the price to rise after the halving, a shortage in the bitcoin supply is not one of them. Because of mining, the supply of bitcoins is constantly increasing. After the halving, the supply will continue to increase. There will be no shortage.

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