Halving is a mechanism that decreases the distribution rate of new proof of work (PoW) cryptocurrency. To be more precise, halving is the systematic decrease of the block reward given to miners. This halving process guarantees that a cryptocurrency will maintain a consistent distribution rate until it reaches its maximum supply.
What does Bitcoin Halving mean?
Bitcoin halving is a coded event within the Bitcoin protocol that transpires roughly every four years or after mining 210,000 blocks. In the course of a halving event, the rewards that miners receive for generating new blocks are diminished by 50%. Consequently, introducing new bitcoins into the system is reduced, lowering the inflation rate.
The halving is a crucial component of the Bitcoin protocol, and given its open-source nature, it is accessible to anyone for viewing. For example, the Bitcoin Core implementation can be seen on GitHub.
What’s the purpose of Bitcoin halving?
The concept of halving is a crucial component of Bitcoin’s economic model, which is structured to regulate the number of bitcoins over a period of time, aiming to establish a limited and valuable digital commodity. The maximum quantity of bitcoins is set at 21 million, and the halving mechanism guarantees that this cap is reached at a consistent pace over time.
The halving process of Bitcoin fosters long-term equilibrium by contributing to a more consistent and foreseeable market. Should new bitcoin production persist at an elevated rate without end, it could trigger hyperinflation and exacerbate market volatility.
The gradual introduction of new bitcoins via halving fosters a fairer allocation of the digital currency. By controlling the influx of new coins, Bitcoin’s halving mechanism guarantees that early participants do not gain an undue advantage over newcomers.
When will the next Bitcoin halving occur?
The subsequent halving of Bitcoin is projected to occur in 2024, roughly four years after the previous halving in May 2020. Consequently, the precise dates for Bitcoin halving must be determined. Currently, over 90% of all bitcoins have been extracted, and the final bitcoin is projected to be mined by 2140.
The initial block reward for Bitcoin was established at 50 BTC when the genesis block was mined. This reward was subsequently halved to 25 BTC in 2012, then 12.5 BTC in 2016, and further reduced to 6.25 BTC in 2020. The upcoming halving in 2024 is expected to decrease the block reward to 3.125 BTC. The halving process will cease after 32 occurrences when no additional bitcoins are generated. This will result in a total supply cap of 21 million BTC.
