In a nutshell, bitcoin halving is exactly what it sounds like – cutting bitcoin supply and mining rewards down the middle. But why would anyone want to do that? Well, every time the currency is halved, its rate of inflation is subsequently reduced, while bitcoin price rises. Bitcoin halving reduces the rate at which new currency is created and brought into circulation. With lower supply comes increased demand.
But – let’s rewind a little bit. First off, remember that a “block” refers to a file that contains 1mb of bitcoin transaction records on the blockchain. BTC miners are responsible for adding subsequent blocks by using their specialized ASIC bitcoin mining equipment to solve complex math equations. Each time they do so, a 64-character “hash” output is produced at random. This locks the block in place, rendering it impossible to change. In exchange for their hard work, the miner receives a bitcoin.
Throughout bitcoin’s short history, BTC halving cycles have typically coincided with significant boom and bust cycles. The first ever bitcoin halving happened back in November 2012. Halvings usually end with prices that are higher than those seen before the bitcoin halving occurred. As we write this, the last bitcoin halving event went down on the 11th of May 2020, which resulted in a block reward of 6.25 BTC. The next big halving event is set for 2024, whereby the block reward is predicted to fall to 3.125.
Back when bitcoin first emerged at the hands of its founder, Satoshi Nakamoto, BTC miners walked away with 50 BTC per block. Today, for every 210,000 blocks mined, the rate at which the currency is created decreases by half. On average, this happens every four years or so, and will continue to do so until all 21 million bitcoins have been mined successfully. After this, no bitcoins will ever be generated again. Ever.
Capping currency supply was Nakamoto’s plan from the beginning, with the goal of gradually increasing scarcity and skyrocketing demand. The 21 million limit is embedded into bitcoin’s very source code and enforced by the network’s nodes.
But will hitting the 21 million mark also mark the end of bitcoin mining as we know it? While the curtain will indeed close on the process of BTC mining itself, miners can still continue to earn revenue – although this will be based on transaction fees alone. While bitcoin price and purchasing power will adjust with the lack of new supply, the currency’s scarcity will make bitcoin far more valuable and attractive to both users and investors alike.
As things stand, the last bitcoin halving will occur in 2140, when the number of existing BTC is set to reach the maximum supply of 21 million bitcoins – of which we’re currently sitting at 19,276,325, as of the end of January 2023. That leaves us with 1,723,675 bitcoins left to be mined before we reach the ultimate 21 million set by Nakamoto. While none of us will be around to see it, the most devoted leaders of the global bitcoin community will make sure we stay on track.