Bitcoin Halving

Since mining is the only way to produce new Bitcoins…

This Bitcoin halving event is affecting its production.

But…

What is even Bitcoin halving?

So first, let’s talk about that in plain English.

What is Bitcoin Halving? 

Bitcoin halving happens every four years, where the reward for Bitcoin miners is cut in half. 

As the word suggests—halving.

• The first Bitcoin halving: November 28, 2012, when the block reward decreased from 50 BTC to 25 BTC.

• The second Bitcoin halving: July 9, 2016, reducing the block reward from 25 bitcoins to 12.5 BTC.

• The third Bitcoin halving: May 11, 2020, halving the block reward from 12.5 BTC to 6.25 BTC.
• The fourth Bitcoin halving: April 19, 2024, halving the block reward from 6.25 BTC to 3.125 BTC.

This reduction in rewards means that the creation and introduction of new BTCs into circulation is fewer. 

It's like making the cake slices smaller over time. 

Why does it happen? 

When Satoshi Nakamoto created Bitcoin in 2009, he set the supply cap at 21 million coins.

Because unlike government-issued fiat currencies… 

Bitcoin operates on a decentralized network.

With it being a decentralized network, it gives people transparency about the supply and prevents anyone from manipulating it.

There's a cap because it is intended to mimic the scarcity of gold.

And when there's scarcity, we're going to apply the basic law of demand and supply:

If the demand is high and the supply is scarce, the price is going to go up.

What does halving mean for miners?

So if the rewards are slashed, your profits are slashed as well.

You see…

Operating to mine bitcoins is expensive. You need to pay for high electricity bills. That's why most bitcoin mining operations are in these countries.



But because of the rewards or profit reduction, most miners may want to find a way to cut their electricity bills as well. Or move to some places with cheaper electricity costs.

However, not all miners can adjust to these changes. 

These miners might choose to stop their operations completely.

TL;DR

• Bitcoin halving is an event that occurs every four years. During halving, the rewards miners receive for validating new transactions are cut in half. 
• The last halving in 2020 reduced mining rewards from 12.5 to 6.25 new Bitcoins per block. This 2024 halving will further decrease new Bitcoin rewards to only 3.125 per block. 
• Halving controls Bitcoin's supply to make existing Bitcoins scarcer, like gold. 
• With reduced supply but steady/rising demand, basic economics suggests halving could increase Bitcoin's price. 

With these in mind, I hope you've understood more about the Bitcoin halving now.