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What is Bitcoin halving?
The halving of Bitcoin is an event that reduces the number of bitcoins in circulation by half. It occurs every four years, or to be precise, every 210,000 blocks its a section of the validation logic in the bitcoin source code. It affects a Bitcoin miner’s profitability and often has an impact on the Bitcoin price. It is also one reason why Bitcoin is perceived as sound money, becoming deflationary in the long run and the inflation rate trending to zero.
Miners are rewarded for validating and confirming transactions on the bitcoin network, and they do this using an agreement mechanism called Proof Of Work. In Proof Of Work, miners constantly validate transactions and group them as blocks for which they’re paid in block rewards; block rewards consist of two elements transaction fees and block subsidy.
The first block mining happened in January 2009. For the first block, the block subsidy was set at 50 bitcoins — an arbitrary number chosen by Satoshi Nakamoto, the creator of the Bitcoin network. In November 2012, Bitcoin went into its first halving at the block height of 210,000, where the block reward was cut in half from 50 Bitcoins to 25 Bitcoins, the second halving occurred in July 2016 at the block height of 420,000 with 15.75 millions of bitcoin in circulation, the third highly anticipated halving occurred in May 2020 at the block height of 630,000 with 18.375 millions of bitcoins in circulation.
Bitcoin halving occurs every four years and roughly till the year 2140 when the Bitcoin blockchain reaches a final number of 32 halvings and stops rewarding miners with block subsidy. After the last Bitcoin halving, miners will have to rely on transaction fees solely.