What is Bitcoin Halving ?
Unlike fiat currencies that central banks can print at will, bitcoin’s supply is algorithmically limited. Only 21 million bitcoins will ever exist. By definition, this makes it, as opposed to an inflationary, a deflationary asset.
Every 10 minutes, miners solve a “block” of bitcoin transactions and add it to the blockchain of bitcoin. This is complicated and expensive work, requiring a lot of power and specialized hardware. So why is anyone going to do it first? Because the algorithm rewards miners with new bitcoins that are generated and added every 10 minutes to the circulating supply. This new BTC distribution is called the “block reward.”
The block reward is 50 BTC when Bitcoin first appeared. That means someone, somewhere, got 50 bitcoins delivered to their wallet every 10 minutes. This was back in the days when BTC was worth a penny and you could use a laptop to mine it.
So does this mean that money basically falls from the sky on those people who run giant mining platforms of warehouse size? Yes, but for their efforts they don’t earn nearly as much BTC anywhere. At present, the reward for the block is only 12.5 BTC.
What has happened? The reward for the block was cut in half, twice. This is a bitcoin programmed feature that occurs every four years (210,000 blocks). The block reward is cut in half once that number is crossed. The cycle is predetermined and will continue until sometime in the year 2140 the last bitcoin is mined.
This process is called a “halving” cycle and may have long-term effects on BTC’s cost. Around 1 year from now, it’s set to happen again.
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