What is the Bitcoin Halving ?

What is the Bitcoin Halving ? Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto in 2009 (learn more about it in our introductory course here). Transactions are verified by network nodes through cryptography and recorded in a public dispersed public ledger called a blockchain. We refer to the process of releasing Bitcoin into circulation as “mining.” Bitcoin is unique in that there are a finite number of them: 21 million. As of the time of writing this, the total number of Bitcoins released into circulation is 19 million.

Bitcoin Miners

The process of releasing Bitcoin into circulation is known as “mining.” Miners, who offer computational power to the Bitcoin blockchain, receive Bitcoin as a reward for verifying and committing transactions to the blockchain. We refer to this reward as the “mining fee.”

The process of receiving a transaction fee alongside the mining fee continues for miners until the release of 21 million Bitcoins. Beyond this point, miners will only receive the transaction fee.After the generation of 21 million Bitcoins, miners will only receive the transaction fee.

Experts predict that the final Bitcoin will not be released until around the year 2140, despite the fact that 19 million Bitcoins have already been released since 2009. So why would it take so much time to release the remaining 2 million Bitcoins?

The reason is the halving.

The Bitcoin Halving

The halving is a Bitcoin mechanism that reduces the mining fee by 50% every 210,000 blocks (approximately every four years). Scheduled for April 2024, the next halving event will result in a reduction of the mining fee from 6.25 BTC to 3.12 BTC. In 2028 the mining fee will then be 1.56 BTC, in 2032 0.78 BTC until almost zero.

Here is a countdown to the next Bitcoin halving.

If you look at any Bitcoin price charts you will see that after each halving there is a price rally. Scarcity is the primary cause of this phenomenon. During every halving event, the volume of Bitcoin released as mining fees decreases by 50%, leading to a reduction in its overall supply. Bitcoin’s price comes from offer Vs demand so with demand steadily growing a reduction of the offer side pushes the price up.

We hope this post helps you better understand the Bitcoin halving mechanism and its importance. 

 

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