What Is Bitcoin Halving?

Updated by Loren Oller verified symbol on July 12, 2022

Bitcoin halving is one of the essential parts of the Bitcoin network. It's an event when mining rewards become halved, hence the name. BTC halving occurs after every 210,000 blocks are mined, or roughly every four years.

The last halving occurred in 2020, and the next is set to happen in 2024. But why every four years? And why does this process matter for the whole Bitcoin network and not just the miners? 

Many questions arise, and we aim to answer all of them in this comprehensive guide on Bitcoin halving

We'll explain how it works, what it means, when it happens, why it happens, how it affects everyone in the network, and more. Most importantly, we'll explain its effect on the end-user, in other words, you. Let's begin.

Bitcoin Halving Definition

Before we give you the definition that will help you understand Bitcoin halving, you first need to know what Bitcoin is and how it works. Most notably, you need to understand:

  • What BTC blocks are
  • How BTC mining works

We'll touch upon these briefly, but make sure to read up on these aspects in further detail as that will help you grasp all the concepts of halving.

So, Bitcoin halving is an event and a process in the core framework of Bitcoin's blockchain where the reward to miners is cut in half, and it happens after every 210,000 blocks have been mined.

In other words, the number of bitcoins awarded to miners for participating in a mining operation is cut in half. The halving ensures bitcoin remains largely inflation-resistant and a scarce resource — in other words, it protects its price and keeps it valuable

How Does Bitcoin Halving Work?

Bitcoin is a decentralized digital currency, and new bitcoins come into existence through a decentralized system through mining. 

If you've already read about Bitcoin mining, you know that Bitcoin miners solve cryptographic puzzles with high-powered computer systems. The puzzles verify transactions on the blockchain, and miners get new bitcoins as a reward.

These rewards are added through blocks, and each block contains 6.25 bitcoins, at least until the next halving event. A new block is mined every 10 minutes, usually between nine and ten minutes. This leads to around 144 new blocks every day, about 52,560 blocks per year, and 210,000 after four years. 

Due to this consistent rate and the exponential growth of the Bitcoin community, the blocks need to contain fewer bitcoins for the network to keep growing steadily and for Bitcoin to remain valuable. Without halving, the more miners there are, the more bitcoins will be mined, and the network will quickly reach the 21 million bitcoin limit.

Due to this, the halving was written into the original Bitcoin code, and it's supposed to happen after every 210,000 blocks are mined. The creator of Bitcoin made it so that the halving always cuts the number of bitcoins per block in half. 

Now, the time it takes the whole network to mine a single block, the halving happens roughly every four years, and it will happen like that until all the bitcoins have been mined. The timing remains consistent, and so does the creation of new blocks, but the number of bitcoins per block is always cut in half after each halving. 

Due to this consistency, we know that the final block of bitcoins will be mined somewhere around 2,140, as the total number of bitcoins is limited to 21 million. This limit also ensures Bitcoin remains valuable, just like gold, which also has a finite amount and is valuable on its own.

Why and When Bitcoin Halving Happens?

As stated, Bitcoin halving occurs, so bitcoins don't succumb to the effects of inflation like fiat currencies do. 

As the halving reduces the block rewards for the whole network, fewer bitcoins get mined and put into circulation. The result of that is that mining becomes more expensive, consequently making the results of mining bitcoins more valuable

What's more, the finite amount further ensures bitcoins remain a scarce and valuable asset

Even though most of what we've discussed makes Bitcoin similar to gold, this specific finite amount is unique. We know that gold is a finite resource, but we don't know how much gold is left under the ground. We keep finding new deposits, which can make gold less valuable if we run into a massive deposit. That's why Bitcoin has a specific finite amount. 

It's worth mentioning that even when the last bitcoin is produced, miners will still have an incentive to mine the cryptocurrency. They'll receive rewards from the fees paid to the network whenever new transactions are made. This involves both trading and the spending of bitcoins

By now, there have only been three halving events out of the 64 that are supposed to occur. The first block, the genesis block, was mined in 2009 when the block reward was 50 bitcoins. As for the halvings, here's a list:

  • 1st halving — Happened on November 28, 2012, when block number 210,000 was mined. The block reward was halved to 25
  • 2nd halving — Occurred on July 9, 2016, after block number 420,000 was mined. The block reward was reduced to 12.5 bitcoins.
  • 3rd halving — Happened on May 11, 2020, after block number 630,000 was mined. The block reward was cut to 6.25 bitcoins, which is also the current reward.
  • 4th halving — Currently projected to happen on March 31, 2024, after block number 840,000 has been mined. The block reward will be cut to 3.125 bitcoins. Here's an online clock to follow when this halving will occur.

What's the Importance of Bitcoin Halving?

The main reason Bitcoin halving is important is to stave off inflation effects. In addition, it effectively leads to fewer bitcoins being issued over time, making Bitcoin a scarce resource, thus ensuring its value rises over time.

This is effectively the opposite of fiat currencies, which are certainly not finite. Due to this, inflation keeps the value of every fiat currency decreasing as time passes. 

Bitcoin is finite, and it doesn't have any real-life value, as it's not tied to anything physical, so the only way for it to have any value is to keep it a scarce resource and entice people to buy bitcoins. The system works, and that's why most other cryptocurrencies also have a final number of tokens.

Meet the miners of bitcoin and cryptocurrencies

Bitcoin Halving Effects on the Bitcoin Price

As there have already been three halvings, we can already determine the effects halving has on the price of Bitcoin. In all three cases, the halving led to a price increase before and after the event. Everything you've seen so far seems like an inevitable outcome, but in truth, no one knows what each halving will bring. 

It's most likely that every halving will lead to a price increase, but we all know how turbulent Bitcoin is, so we can never know for sure. However, we can still take a look at the past halvings and what happened before and after they occurred:

  • 1st halving price change — In the year preceding the halving event, the price rose by 385%. In the year after, the price rose by 8.069%.
  • 2nd halving price change — The year before the halving, the price rose by 142%. In the year after, it increased by 284%. 
  • 3rd halving price change — In the year before the halving, the price increased by only 17%. But in the year after, it improved by 559%.

It's worth noting that Bitcoin has another ace up its sleeve that can affect here — mining difficulty

If the price and the demand don't rise, miners won't have an incentive. To counter that, Bitcoin has a process that changes the difficulty of mining blocks. In other words, the difficulty decreases due to a lowered price and lower demand, which consequently keeps miners incentivized. They get to mine more bitcoins, which effectively offsets the money they lose at a lower price. 

We've seen this happen twice. Both times, the price was due to a result of a halving, but it also fell significantly later on. However, the prices during these crashes have never been lower than the ones before the halvings

After late 2021, we've seen the price of Bitcoin fall significantly. However, its price at the time of the third halving was around $9,000. And as you've seen, Bitcoin hasn't fallen below $29,000 more than two years later, which is significantly higher than the price during the third halving.

It all seems to be going in the right direction for now, but you need to understand that this is not a rule; it's just what has been happening until now. Bitcoin's price is still unpredictable, and we'll never know its direction.

Implications of Bitcoin Halving for the Bitcoin Network

Every halving leads to fewer new coins being added to the total supply, but that doesn't mean the demand for bitcoins becomes lower. From everything we've seen so far, the demand has only been rising

Consequently, all of this impacts investors, traders, miners, and even regular users like you. So, regardless of whether the Bitcoin holder is a massive corporation or a single person who only buys bitcoins to use in online Bitcoin casinos, halving is an event that affects all. 

From the information we have from prior halvings, this is the typical chain reaction that occurs with each event:

  1. The block reward is halved.
  2. Inflation is halved.
  3. Available supply lowers.
  4. Demand rises.
  5. Bitcoin's price rises.
  6. Miners' incentives stay the same or rise due to increased value, even though the reward is cut in half.

Let's now look at how halving affects every type of user and even the blockchain itself

Blockchain

The effect on the blockchain is clear — the halving cuts the miner block reward in half, which effectively limits the supply of new coins, keeping prices high as long as there is still demand

This ensures the existence of the Bitcoin network in the way it currently exists, and it's one of the main aspects of what makes Bitcoin and the underlying blockchain technology successful. 

Miners

Halving is a double-edged sword for miners.

On the one hand, halving limits the number of bitcoins, which effectively leads to an increase in price, and this is undoubtedly good news for miners. 

However, on the other hand, halving cuts down the block reward in half, which effectively leads to fewer new bitcoins for all miners. 

As research has shown, the price of Bitcoin is in direct contrast to Bitcoin's mining capacity. Therefore, when the price rises, the number of miners falls, and vice versa. 

Investors and Traders

Halving leads to a reduced supply of bitcoins, typically leading to higher demand, resulting in higher prices. This is good news for investors, and it's why trading activity naturally increases before each halving in anticipation of a higher Bitcoin price

However, as you've already seen, the price doesn't necessarily have to rise, so investors still need to be careful. 

Corporations 

Bitcoin halvings can have similar implications for corporations as they do for traders and investors.

If they are investing in the crypto market or already have assets in it, the increase in the price of Bitcoin could likely lead to a rise in the prices of numerous other cryptos, as altcoins tend to improve when Bitcoin does and vice-versa. 

But, as always, nothing is set in stone, so prices might not rise. 

End-users

The implication of halving events is clear for the users as well. As this is likely you, you need to understand that the limited number of bitcoins will likely improve the price, so the value of your assets might get higher

If you're typically spending bitcoins on crypto casinos and other sites, you should know that this might be the time to keep your bitcoins instead of paying them. Of course, this is assuming that the price will follow similar patterns after the next halving. 

If the demand and the price rise, you should know those transaction fees will likely rise as well. What's more, increased demand will also mean slower transaction times. This is also typically the case before and after the halving event, as trading activity is higher in those periods, leading to slower transaction validation times. 

Why Should You Be on the Lookout for the Next Bitcoin Halving?

You should be on the lookout for several reasons, most of which you've already seen in this piece:

  • The block reward will be cut in half, so you'll mine fewer coins if you're a BTC miner.
  • Small-time miners are likely to leave the network or consolidate under more prominent players, as halving will immediately cut their rewards in half, making it less lucrative for some and even leading to losses for others. 
  • Demand will likely rise, which will lead to more daily trading and thus potentially slower transaction validation times and higher fees.

The price of Bitcoin will likely rise.

FAQ

When is the next Bitcoin halving?

The next Bitcoin halving is expected to occur on March 31, 2024.

Is Bitcoin halving a good thing?

It is. It keeps the value of Bitcoin high as it keeps inflation at bay. Therefore, it's also a good thing for everyone in the Bitcoin community. 

Does Bitcoin halving increase the BTC price?

Halving itself doesn't lead to a price increase. It simply splits the block reward in mining. However, it does keep inflation at bay, and the demand for the coin keeps going up, which is why the price typically goes up. It has been doing so with each of the three halvings so far. However, there's no way of knowing what will happen with every other halving that follows.

When will Bitcoin halving stop?

Halving will no longer occur once all 21 million bitcoins have been mined. This is expected to happen somewhere around 2,140, but the halving countdown will likely cease sometime before since it happens approximately every four years.

Should I invest in Bitcoin right before the next halving?

A halving has always been followed by a price increase, which is why some believe that it's good to invest before it. However, halving is not necessarily the cause of that, so you can never be sure what will happen. It would be best if you put some thought into it before deciding to invest. We kindly suggest that you consult an expert before making any investments.

Is Bitcoin mining the same thing as Bitcoin halving?

No, it isn't. Bitcoin mining is the process through which new coins enter circulation, and new transactions get validated, and it's all done by miners. Bitcoin halving is the event when the block reward miners get for mining is cut in half. 

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Loren Oller
Loren Oller verified symbol Author
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I consider myself to be an avid guitar player, sports enthusiast, and a big fan of blackjack and social casinos. My task is pretty easy to resume.. make sure you are well informed on all US casinos that might interest you. I've been writing reviews based on my experiences for a while and I'm happy to say that my work will truly help you even if it's just by telling you the legal gambling laws of a state or the top games that are trending right now!
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