In a significant event for the Bitcoin blockchain, the reward for mining, known as a Halving, is set to occur once again. Since 2020, miners validating transactions have been receiving 6.25 Bitcoins (BTC) for each successfully mined block. A Bitcoin Halving, a critical event in the Bitcoin network, occurs when the reward for mining Bitcoin transactions is halved. This reduction in reward decreases the rate at which new coins are generated, consequently lowering the available supply of new Bitcoins. Expected to take place in the early-to-mid part of 2024, the upcoming Halving will see the block reward decrease to 3.125 BTC.
When Did The Last BTC Halving Take Place?
The last Halving event took place on May 11, 2020, resulting in a block reward of 6.25 BTC. The final Halving is anticipated to happen around the year 2140, coinciding with the theoretical maximum supply of 21 million Bitcoins.
Bitcoin operates on blockchain technology, a network of computers (referred to as nodes) running Bitcoin’s software and maintaining a partial or complete transaction history. Bitcoin mining involves individuals using computers or specialised hardware to participate in the Bitcoin network as transaction processors and validators. Utilising a system called proof-of-work (PoW), miners validate transaction information by solving encrypted hashes, which requires substantial time and energy expenditure, serving as proof of work.
When a block is filled with transactions, it enters a mining queue, and miners compete to find a number with a value lower than the hash. Successful mining confirms transaction legitimacy and initiates the creation of a new block, further verified by nodes through a series of confirmations, forming the blockchain.
Past Halving Events:
There have been a total of three Halving events so far:
- November 28, 2012, reducing the reward to 25 Bitcoins
- July 9, 2016, reducing the reward to 12.5 Bitcoins
- May 11, 2020, reducing the reward to 6.25 Bitcoins
ALSO READ: As Bitcoin Turns 15, Here’s A Look At The World’s Most Valuable Crypto’s Past, Present, Future
How Does Bitcoin Halving Work?
Every 210,000 blocks, roughly every four years, the block reward given to Bitcoin miners is halved, reducing the rate of new Bitcoins entering circulation. This process continues until around 2140, reaching the proposed limit of 21 million coins, after which miners will rely on transaction fees for rewards.
Halving events mark a significant drop in the rate of new Bitcoins produced, ultimately leading to the cryptocurrency’s finite supply. As of October 2023, approximately 19.5 million Bitcoins were in circulation, with roughly 1.5 million yet to be released through mining rewards.
What Impact Does Bitcoin Halving Have?
Halving events simulate diminishing returns, intending to boost demand for Bitcoins. The Bitcoin mining algorithm targets new block discoveries every 10 minutes on average, but the time taken can vary, affecting the interval between Halving events.
It’s anticipated that the last Bitcoin will be mined around 2140. As the reward halves every 210,000 blocks, it will continue to decrease until reaching one satoshi, the smallest Bitcoin denomination. This may persist until the total Bitcoin supply reaches 21 million, potentially resulting in millions of satoshi as rewards post-2140.
ALSO READ: Future Of Bitcoin: Store Of Value Or Digital Gold?
A Bitcoin Halving reduces the rate of new Bitcoins entering circulation by half. This process is expected to continue until around 2140, coinciding with the proposed limit of 21 million bitcoins. From its inception in 2009, the block reward has undergone reductions with each Halving, starting at 50 Bitcoins and reducing to 6.25 Bitcoins per block as of May 11, 2020.
The implications of Bitcoin Halving events are substantial, potentially leading to consolidation among miners as smaller players may exit the mining ecosystem or be absorbed by larger entities. Also, the recent BTC rally we are seeing, where the price of the token went past $52,000 for the first time since 2021 at the time of wiritng, is a direct result of the excitement among investors around the upcoming Halving event.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.