Key points
- Bitcoin halving helps control the supply and shape the deflationary nature of the asset.
- The next bitcoin halving is predicted to occur in April 2024.
- Once the bitcoin mining process concludes, the network will continue to operate.
Consider a scenario where gold miners are aware that the amount of gold they can mine will halve every four years but persist in their efforts undeterred. This is akin to the dedication seen in bitcoin mining. The phenomenon known as bitcoin halving is not a sporadic occurrence but a recurring event that shapes the cryptocurrency landscape.
Bitcoin halving refers to a function within the blockchain algorithm that reduces the reward for mining new bitcoin by 50% to manage the currency’s supply and maintain its scarcity. Here’s what you need to know about bitcoin halving and its implications.
What is bitcoin halving? And how does it work?
One of the most fascinating aspects of the bitcoin world is the recurring event aptly named bitcoin halving. But what is it? And how does it work?
“Approximately every four years, or, more precisely, every 210,000 blocks, something unique happens in the world of bitcoin. It’s called the bitcoin halving event,” said Konstantin Boyko-Romanovsky, the CEO at Allnodes, a masternode hosting and block transactions validating services platform.
Bitcoin halving revolves around the people we call miners, who lend their computing power to maintain and secure the bitcoin network. In return, they earn rewards in the form of newly minted bitcoin.
But there’s a catch. “This reward is reduced by half every four years, hence the term halving. It’s akin to a predictable, scheduled pay cut for these miners,” Boyko-Romanovsky said.
Halving not only adjusts miners’ rewards. It also reduces the rate at which new coins are created, decreasing the new supply and influencing the market value.
Basics of bitcoin mining
Miners are, in essence, the engine that keeps the bitcoin machine running smoothly. They validate bitcoin transactions and add new blocks to the blockchain, helping the ecosystem remain secure and operational.
This process requires that miners solve difficult mathematical puzzles to prove that the new blocks they’re adding to the chain are valid. The first miner who succeeds is rewarded with newly minted bitcoin.
Referring to these math problems as puzzles may downplay their complexity. Miners must determine the correct hash, or encryption tool, to satisfy the equation. They often cycle through trillions of hashes per second, a feat requiring so much computational power that it is largely done by companies or groups with the resources for such endeavors.
Bitcoin halving dates
Bitcoin halving doesn’t sneak up on you like a surprise birthday party. It follows a predictable cycle. Specific markers dictate when the event occurs, giving us the opportunity to reflect on the past and prepare for the future.
Let’s take a look at the historical halving events to better understand their impact and glean insight into bitcoin’s journey thus far.
Past bitcoin halving events
While bitcoin halving is predictable, the exact date at which future halvings will occur isn’t certain. Using the predetermined logic of the bitcoin algorithm, we know halvings happen every 210,000 blocks, or roughly every four years. Given that the last halving occurred in May 2020 at block number 630,000, the next halving is expected to occur in April 2024 at block number 840,000.
Future bitcoin halving events
Bitcoin halvings will continue until the value of the reward reaches zero, which is estimated to occur in 2140.
When is the next bitcoin halving?
Peering into the future of bitcoin, the next halving stands out. A spectacle in the cryptoverse, the upcoming halving has the potential to ripple through the digital ecosystem. But when exactly can we expect this event to occur?
Experts predict the next bitcoin halving will occur in April 2024, but the timing isn’t an exact science. Network conditions, such as the overall mining power, can cause slight variations in block creation speed, which can shift the date.
As the clock ticks toward the next halving, the anticipation intensifies. Conversations swirl around potential changes to bitcoin’s price, scarcity and market impact. Each tick of the block height moves us one step closer to this milestone in bitcoin’s evolution, a moment that could again underscore the cryptocurrency’s dynamic role in our digital economy.
Why does bitcoin halving matter?
To appreciate the significance of bitcoin halving, you must understand its fundamental purpose and the impact it can have on the bitcoin ecosystem and broader financial landscape.
“Bitcoin halving is important because it reduces the new supply of BTC that is brought into circulation. It’s essentially the complete opposite of governments printing more fiat money,” said Kadan Stadelmann, chief technology officer at Komodo, an open-source technology provider.
That statement underscores bitcoin halving’s essential role in controlling the cryptocurrency’s supply, a stark contrast to the practices of traditional financial systems. While central banks can adjust the supply of money in the economy, the amount of new bitcoin decreases over time.
If the supply of Bitcoin decreases due to halving and demand remains consistent or grows, it could drive the price of the digital asset higher. “Theoretically, if there is less BTC available for miners to sell and a steady demand from buyers, the price of each unit should continue to increase over time,” Stadelmann said.
By understanding bitcoin halving, we gain insight into the cryptocurrency’s potential long-term value, its appeal as “digital gold,” and why each halving event becomes a focal point for market analysts, investors and bitcoin enthusiasts.
Is bitcoin halving bullish?
Bitcoin halving is generally considered bullish because each event reduces the rate at which future bitcoins are created, thus boosting the scarcity and value of existing bitcoins.
But a positive effect isn’t guaranteed. For instance, while bitcoin’s price rose on Nov. 28, 2012, and July 9, 2016, it fell on May 11, 2020. It increased shortly after the May 2020 halving, however, so it could be argued that halvings have historically been bullish indicators for bitcoin.
What happens when no bitcoins remain?
An intriguing question that often arises in the crypto world is, what happens when all the bitcoins are mined? It isn’t a hypothetical scenario but a future reality baked into bitcoin’s design.
With the reward being halved every four years and bitcoin’s supply capped at 21 million, the final halving is estimated to occur in the year 2140. From then on, no new BTC will be created.
That statement reveals a stark fact about bitcoin’s supply: It is finite.
Around 19.3 million bitcoins, or roughly 92% of the total bitcoin supply, have been mined since the cryptocurrency’s launch more than 14 years ago.
After the last bitcoin has been mined, miners will no longer receive bitcoin rewards for adding blocks to the blockchain. But that doesn’t mean miners will become obsolete. They will continue verifying transactions and maintaining the integrity of the bitcoin network, even in a post-mining era.
Miners will continue to receive transaction fees as they do now and keep the network going.
One fascinating twist in this narrative is the reality of lost bitcoins. According to Chainalysis, roughly a fifth of all coins mined to date are considered lost. That highlights an interesting aspect of the bitcoin ecosystem: Even with a capped supply, the number of bitcoins in circulation may be significantly lower.
The end of bitcoin mining won’t spell the end of bitcoin. It will mark a new phase in the life cycle of this pioneering cryptocurrency, with miners transitioning roles and the market adapting to a fixed supply. As we approach that milestone in 2140, the dynamics of the bitcoin network and its broader impacts on the crypto market will undoubtedly continue to captivate our attention.
Frequently asked questions (FAQs)
Bitcoin is halving in 2024. Experts anticipate the next bitcoin halving will occur in April 2024.
Bitcoin experiences a halving approximately every four years, or, more precisely, every 210,000 blocks. This event is a preprogrammed feature aimed at controlling the supply of the cryptocurrency. As a result, the reward that miners receive for validating transactions and adding new blocks to the blockchain is reduced by 50% at each halving.
When bitcoin is halved, the reward for mining new blocks on the blockchain is reduced by 50%. That means miners receive fewer bitcoins for the computational work they contribute to the network. The halving event is significant because it decreases the rate at which new bitcoins are created, contributing to the cryptocurrency’s scarcity, which is a key factor in its value.
While it isn’t guaranteed, bitcoin halving events have historically been associated with a rise in the price of bitcoin. The reason is the law of supply and demand. When the supply of new bitcoins entering the market decreases (due to halving) and demand stays the same or increases, the price may increase. But various other factors, including market sentiment and broader economic conditions, also play a role in determining bitcoin’s price.
