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crypto-basics

What is Bitcoin Halving?

Matthew Levy
Matthew Levy

Bitcoin halving is when the rewards of mining Bitcoin are cut in half. Typically, bitcoin halving occurs every four years (after every 210,000 blocks are mined). This is part of a wider strategy to keep the maximum supply of Bitcoins fixed.¹

Why Bitcoin Halving Takes Place

When a block is mined, miners are rewarded with a fixed number of Bitcoins. Around 210,000 blocks² are mined every four years. However, after each set of 210,000 blocks, the reward in terms of Bitcoins offered for each block is reduced by half. In short, the development of blocks takes place at the same pace, but each block’s value is limited to a fewer number of cryptos.

The halving process takes place until the number of Bitcoins reaches the maximum supply of 21 million2. If the demand for crypto is sustained, the value of Bitcoin could increase each year due to its finite supply.²

If the demand for Bitcoin is muted, the impact of halving would be minimal, as the available quantity would be sufficient for investors and other users.

Example

In the early days, miners were rewarded 50 Bitcoins per block.³ In 2012, this was reduced to 25 and 12.5 in 2016. The most recent halving took place in 2020, and 6.25 Bitcoins are awarded for every block mined. The next halving is expected to happen in 2024.³

Sources

  1. Bitcoin halving is how the supply of the world’s largest cryptocurrency is controlled. Business Insider.
  2. Bitcoin Halving. Investopedia.
  3. What is Bitcoin Halving and Why Does it Matter? U.S. News Money.

Please note that this article is for educational and informational purposes only. The example is for illustrative purposes only.

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crypto-basics

Matthew Levy

Matthew Levy is a Chartered Financial Analyst (CFA) designation holder, a former portfolio manager for $600+ MM in assets, and started his own business writing financial analysis for clients worldwide