What is the Halving?
The Bitcoin halving is an event built into Bitcoin’s code that reduces the reward miners receive for adding a new block to the blockchain. This reduction occurs every 210,000 blocks, roughly every four years, to control Bitcoin’s supply and ensure it remains a scarce asset.
Bitcoin has a hard cap of 21 million coins. With each halving, the rate at which new bitcoin enters circulation slows and make Bitcoin increasingly scarce.
When is the next Bitcoin Halving?
The next Bitcoin halving is projected to occur around April 18, 2028. The current reward of 3.125 BTC per block will be cut to 1.5625 BTC. Halvings follow a strict schedule set by Bitcoin’s code, taking place every 210,000 blocks. The final bitcoin will be mined around 2140, after which no new coins will enter circulation.
Bitcoins Issuance and Inflation Plan.
Block Rewards
Block rewards are what miners earn for successfully adding a block of transactions to the blockchain. Mining is a competitive process where miners run computations to solve a cryptographic puzzle, and the miner who solves it first earns the reward. This reward includes the block subsidy—newly created bitcoin—and any transaction fees from the included transactions.
The block reward serves two purposes: it introduces new bitcoins into circulation and provides a financial incentive for miners to secure the network.
The Halving is important for Bitcoin’s Value
Historically, Bitcoin halvings have been associated with price increases. After each halving, the supply of new bitcoin is cut in half, which some believe creates upward price pressure as long as demand holds steady or grows. The Stock-to-Flow (S2F) model supports this theory, suggesting that as the flow of new supply decreases, the scarcity drives up Bitcoin’s value.
However, not everyone agrees that halvings directly impact Bitcoin’s price. Critics argue that because halvings are predictable, the market should already price in their effects. Additionally, some analysts believe Bitcoin’s price moves align more closely with broader economic trends rather than just supply cuts.
Speaking for that is that Bitcoin Price correlates highly with the global Money Supply.
Source: Lyn Alden
What happens when Block Rewards become too small?
Once the block reward becomes very small, miners will rely primarily on transaction fees to cover their costs. While some fear that this could make mining less profitable and weaken network security, others believe advances in technology and layer-two solutions like the Lightning Network will offset this shift.
Final Thoughts
- Bitcoin halving events occur every 210,000 blocks (about every 4 years)
- Halvings are designed to make Bitcoin scarcer over time
- As block rewards shrink, miners will eventually transition to earning income mainly from transaction fees