When the next Bitcoin halving event takes place an estimated two years from now, the reward for miners of the cryptocurrency will be cut in half.
Despite what some people believe, there can’t be an infinite amount of digital currencies because that would take away their value. That’s where Bitcoin halving comes in.
Around 2140, Bitcoin will cap at 21 million total coins in circulation — no more will be produced after that point. For this reason, Bitcoin halving occurs to maintain the cryptocurrency’s scarcity and because demand will be high when supply gets low. Halving can be defined as an event that occurs every four years where the amount of Bitcoin awarded to crypto miners is reduced by half until the overall cap is reached.
Bitcoin halving occurs every four years because Bitcoin’s mining algorithm states that new blocks are mined every 10 minutes. This timing fluctuates as new miners join the network, and in the past decade, the average time it takes to mine a new block in Bitcoin’s blockchain is 9.5 minutes.
What is Bitcoin halving and how does it work?
To understand halving, you have to know how crypto mining works. Crypto mining is a process that verifies and adds new transactions to the blockchain for a cryptocurrency. This system usually requires a network of computers with competitive miners running calculations behind them. When miners land on the magic number to mine a new block in the blockchain, they are rewarded a predetermined amount of newly minted bitcoins.
There have been three halving events since the first unit of Bitcoin was mined on January 3, 2009. At this time, the reward for Bitcoin mining was 50 bitcoins.
When is Bitcoin halving expected to occur next?
May 2024 is the next estimated Bitcoin halving date upon which the price miners get paid in Bitcoin to create a new block will be split in half once again.
Halving happens after a set of 210,000 blocks is mined; we’re currently in the third cycle.
When were the previous Bitcoin halving events?
- The first halving occurred on November 28, 2012, after 210,000 blocks were mined and the reward was knocked down to 25 bitcoins.
- The second halving took place on July 9, 2016, after miners reached 420,000 blocks, and the reward was taken down to 12.5 bitcoins.
- The third halving was triggered on May 11, 2020, which took the mining reward down to 6.25 bitcoins. This is what miners currently earn. Here’s how our friends at Coinbase broke things down at the time:
It’s crucial to note Bitcoin’s value in correlation with these halving events because 6.25 bitcoins are worth about $24,000 today. Back in 2009, Bitcoin was only trading for $11 per share.
When the fourth halving event occurs in 2024, the mining reward will decrease to 3.125 bitcoins.