Understanding Bitcoin Halving: A Beginner’s Guide | Posted by SatoshiLabs | February 2024

adminFebruary 26, 2024

If you’ve browsed Crypto Twitter (CT), cryptocurrency news sites, YouTube videos, or cryptocurrency-focused newsletters, you’ve likely come across the term Bitcoin Halving. Not yet? Go back and take a look.

Halving is coming! 🙂

For perspective, the graph below shows the interest in the term ‘Holding Bitcoin’ on Google Trends over the past year (I would say it has increased 6x!).

This resonance is bound to grow as the actual halving date approaches, so I hope I can provide some clarity on the concept.

In this primer, we’ll cut through the complexities of the Bitcoin halving to learn essentially what, why, how, and when it happens.

Let’s look at the Bitcoin halving in a context closer to everyday life.

Imagine you are a fan of a limited edition comic book series 🦸‍♀️. The publisher announced that it would publish exactly 100 copies of the new book each year. Obviously, it creates a buzz among collectors and fans like you to buy this product. Demand increases. Now the publisher is announcing new plans. This means that each year they will only produce half a copy of the next release. So next year, we release 50, 25, etc. (Don’t ask me how I’m going to publish 12.5 copies 😄. You’ll get the idea). So publishers are essentially “halving” their supply. What does this do? Because there are fewer new books each year, comic books become rarer and potentially more valuable over time. Think about scarcity!

Bitcoin halving follows similar principles. However, in this case it remains pre-set and immutable (unlike comic book publishers who may decide to go back to Half-Life). Halving is an event written into Bitcoin’s DNA. This is an event that occurs every 210,000 blocks (if that sounds weird, see the basic glossary), or roughly every four years, and halves the number of new Bitcoins that miners create and earn as rewards.

Putting that into context,

When Bitcoin was first mined in 2009, 50 BTC was paid per block as a reward.
After the first halving in November 2012, that number was reduced to 25 BTC per block.
In July 2016, its value was halved again to 12.5 BTC per block.
Bitcoin’s last halving was on May 11, 2020, resulting in a block reward of 6.25 BTC.

Halving simply reduces the reward for mining a block by half. Any guesses on how the upcoming halving will affect rewards? 🙂 (e.g. 3.125 Bitcoin).

memo: The number of usable Bitcoins is limited to 21 million Bitcoins, and the limit is expected to be reached in 2140.

Think about the economy! “Halvings” limit the supply of new Bitcoin, ensuring that the total supply reaches its cap more gradually. This is the core mechanism that controls the supply of new Bitcoins in circulation.

What was the biggest criticism of FIAT currency? Some would say endless central bank printing and resulting inflation.

Bitcoin, on the other hand, is limited to 21 million Bitcoins and the halving limits the amount of new Bitcoins entering the system, which means there will be little monetary inflation and will fall further.

If you want to delve deeper into the economics of Bitcoin, you might find this article interesting to read.

What is Bitcoin Halving?
Bitcoin halving is an event that occurs approximately every four years, in which the reward for mining a new Bitcoin block is halved. This reduces the rate at which new Bitcoins are created and limits the total supply of Bitcoin in circulation over time.
Why does Bitcoin have a halving?
Halving is part of Bitcoin’s DNA, built into the code by Bitcoin’s creator, Satoshi Nakamoto. Think of it as part of Bitcoin’s monetary policy. The purpose is to control and reduce the supply of new tokens over time, mimicking the extraction of precious metals such as gold, for example. This event serves to control inflation.
Will the halving affect the value/price of Bitcoin?
Historically, halvings tend to highlight Bitcoin’s scarcity. However, it is important to note that many factors affect the value of Bitcoin. Again, this article may help explain the economics behind Bitcoin and the halving event.
When a halving occurs, will existing Bitcoins be halved or reduced?
No, the Bitcoin you currently have in your wallet will not be halved or reduced. Halving only affects rewards to Bitcoin miners.
Will Bitcoin Halving affect transaction fees or processing times?
Bitcoin halving itself does not directly affect transaction fees or processing times.
Can I track the upcoming Bitcoin halving date?
The timing of Bitcoin halving is determined by the number of blocks mined rather than a specific date. This occurs every 210,000 blocks, approximately every four years. Here is Blockchair’s resource on tracking Bitcoin halving: