What is the Bitcoin halving?
A lot of new Bitcoins are added to the circulation every day, this is done by Bitcoin mining. Mining sounds like Bitcoin is being pulled out of the ground somewhere, but actually, it has everything to do with computers. Bitcoin is and remains a digital currency.
With mining, a large network of powerful computers search for a new block and adds it to the blockchain. This cost a lot of hash power (computing power), and the owner of the computer (the miner) gets a reward of new Bitcoin and the transaction costs. Only the first person who finds the block and puts the block on the blockchain receives this reward. If you are looking for a more detailed explanation about cryptocurrency mining, you can find it on our website. However, when Bitcoin first started, you were able to earn more Bitcoin by mining than you do now. That’s due to Bitcoin halving, and would like to tell you more about that.
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Bitcoin is capped at 21 million
So, every day, new Bitcoin are added to the circulation supply and can be used for many things, like a payment or an investment. However, this will stop one day because there is a limit to the number of Bitcoins that can be mined. A total of 21 million bitcoins can become available (20,999,999,9769 BTC to be exact) and that is really the maximum. That sounds like a lot, but you can imagine that with mining, that number will actually be reached. To slow down this process a bit and reduce inflation the inventor of Bitcoin invented the Bitcoin halving.
The rewards are getting smaller
When Bitcoin was launched in 2009. One miner who found a block received a reward of 50 Bitcoin. That wasn’t very much back then because the value of the coin wasn’t very high. Nowadays, you would have a lot of money with 50 Bitcoin. As the value of Bitcoin increases, and to properly control the flow of new Bitcoin, the reward is halved every 210,000 new blocks. Because a new block is added every 10 minutes, this halving will happen every 4 years (estimation).
A Bitcoin halving sounds like a huge bummer for the Bitcoin miners, but as we said, the Bitcoin halving also takes into account the value of the coin. Since the demand for Bitcoin is likely continue to rise, the value of 1 BTC will also rise. The 12.5 Bitcoin rewarded to a miner until 2020 is now worth much more than the 50 Bitcoin rewarded to a miner in 2009.
Bitcoin Halving history
Right now, there have been three Bitcoin halvings:
- The first halving took place on November 28, 2012, at 16:24. The reward was halved from 50 BTC to 25 BTC. Block 210,000 was mined by an unknown miner.
- The second halving took place on 9 July 2016 at 18:46. The reward was halved from 25 BTC to 12.5 BTC. Block 420,000 was mined by F2Pool.
- The third halving took place on May 11th 2020 at 21:23. The reward was halved from 12.5 BTC to 6.25 BTC. Block 630,000 was mined by AntPool.
- The fourth halving is expected at the end of April 2024 (or beginning of May).
When’s the next Bitcoin halving?
The next Bitcoin halving is in 2024 and is expected around the end of April/beginning of May. You can see the estimated date on this website. During this halving, the reward for the miners will be halved from 6.25 BTC to 3.125 BTC. When block 840,000 is mined, the halving will start automatically. In general, if we look at history, the Bitcoin price will go up after the halving. Is this a reason to buy Bitcoin? We can’t know for sure until time has passed.
What if we run out of Bitcoin?
So, for approximately every 4 years (every 210,000 new blocks), the reward will be halved. In 2032, the reward will be less than 1 Bitcoin. You will only get 0.781 BTC as a reward. So, you can imagine that if this is divided by 2 every 4 years, a small amount of rewards will remain. Still, miners can continue to invest in their hardware to be the fastest at finding new blocks. In addition to the reward, miners also get the transaction costs of the transactions that are bundled in a block.
When the last Bitcoin has been mined (around the year 2140) and therefore no reward can be given for each block, the transaction costs for each transaction must provide sufficient cash flow for the miners.