Excerpt
I explain the Bitcoin Halving, a crucial moment in the Bitcoin network that occurs every 210,000 blocks, roughly every four years. This process halves the mining reward, impacting bitcoin’s supply and price. Watch now to understand how it works and why it matters.
Transcript
What is a Bitcoin halving? Every 210,000 blocks the Bitcoin halving occurs, which is about every four years. So what happens here? The amount of bitcoin that is being given to miners as a reward for mining a block is being reduced by half.
At the beginning, when Bitcoin started out on the 3rd of January 2009, in the first years the amount of Bitcoin that were given to miners was 50 bitcoin. Four years later it was cut in half — it was only 25. Since the last halving in 2020, the reward for miners is 6.25 bitcoin, and the upcoming halving is the fourth halving of Bitcoin. It is expected to happen on April the 20th in 2024, and then the amount of the reward is being cut in half again to 3.125 bitcoin.
Why is It Important?
It’s supply control. It’s controlling the issuance of new bitcoin into the world, into the system. By reducing the rate at which the new coins are created, we also have a predictive issuance, and everyone knows how many bitcoin will be available or in circulation at a certain period of time.
Currently, around 19.7 million bitcoin have been mined already. By 2140, all 21 million bitcoin will have been mined. Mining will continue, as it is an important part of Bitcoin and it is securing the whole Bitcoin Network. After 2140, the miners will be rewarded by transaction fees only.
Bitcoin Supply Over Time
Here I show you how the total supply of Bitcoin is increasing over time and how it flattens out in the end. It’s already 93% of all bitcoin that will be available that have been issued. So the future amount of new bitcoin that are free and available in the market is shrinking all the time.
Influence on Price
Historically, we have seen that the halving also has an influence on the price. Of course, it’s not only the halving which is important. There are a lot of other factors playing into the price of bitcoin — most importantly, supply and demand. This is also the reason why halvings usually have an effect on the price.
We could see that in recent years, mostly in the time before the halving and in the months after the halving. In the years 2017 and 2020, the value of bitcoin went up after the halving, but then it went down again.
Bitcoin Price Charts and Past Halvings
On this chart, you can see how the halving has maybe an influence on the price of bitcoin. The dark line on the top is the logarithmic graph of the development of the bitcoin price. So over the years, yes there were drawbacks, but basically it has been going up. The blue line on the bottom is the linear price of bitcoin.
Where you can see when the block reward was 12.5 bitcoin, we had a spike. Then in the following years after 2020, we had two spikes after the halving and then the price fell again — and now we will see what’s happening. I mean it’s logical that when the demand for bitcoin increases and the supply decreases, then the price will go up.
This is the fourth halving. The first halving happened on November 28th in 2012, the second on July 9th in 2016, and the third one on May 11 in 2020. As I said, on April 20th in 2024, the fourth halving will happen — but we don’t know these dates exactly. We only know it after, in fact.
Why the Halving Date Isn’t Precise
Why is that? The Bitcoin network is built that way that every 10 minutes a new block is being mined. But if the processing power, the hashing power in the network goes up because new miners are joining, the puzzle — the solution to the puzzle — is being found faster. That means that the block time decreases.
In case miners go the other way, they turn off their machines, they leave the network because it might not be economical anymore, then the puzzle will be solved later because it takes longer to find the solution for the remaining hashing power.
We can’t really say what’s the date, what’s the time, when the next 210,000 blocks will be mined until the next halving — and that’s the reason why we don’t know an exact date for the next halving.
How the Halving Happens
How does this halving work? Well, it’s not an event, it’s basically a non-event because no one has to do anything that it happens. Satoshi Nakamoto built the halving into the code.
And here you can see the code — how Satoshi Nakamoto was programming the halving into the Bitcoin software code. That’s all. I hope you understand now much better than before what a halving is and its importance for the network.
