A brief guide to bitcoin halving

If you want to know more about the upcoming Bitcoin Halving, you have come to the right place. The following article provides you with all the necessary information so that you are well prepared.

What does bitcoin halving mean?

Since the emergence of cryptocurrencies, bitcoin halving has been eagerly awaited. With each halving, on the one hand, the reward for the miners that they receive for confirming the transactions is halved, and on the other hand, the distribution of Bitcoin is slowed down.

The Bitcoin Halving always takes place when 210,000 units were mined. This happens about every 4 years. In total, the maximum number of Bitcoin ever available was limited to 21 million. With the last possible halving, probably in 2140, all Bitcoin will have been generated. In May 2020, the reward will halve from 12.5 to 6.25 Bitcoin. These are distributed to the miners on average every 600 seconds.

How does bitcoin halving work?

Bitcoin halving is part of blockchain technology. It determines the speed with which new Bitcoin are generated. In order to complete a transaction between the sender and the recipient, a complicated mathematical task has to be solved. The fastest way to do this is to receive the reward, the so-called Block Reward.

This process is called "mining". As a reward, the “miners” receive a certain number of new Bitcoin for verifying the transactions. These transactions are summarized in blocks. Every time after 210,000 blocks are created, according to the original protocol, the reward is halved.

Effects of bitcoin halving on miners

• Mining causes high costs due to hardware and power consumption. If these costs are no longer covered by the halved rewards, it is no longer profitable for the miner.

• If the Bitcoin price does not rise in time, some miners will choose not to mine anymore. As a result, the number of verified transactions in the blockchain network is reduced.

• Despite this, the speed at which blocks are mined is not affected. The Bitcoin network regulates this automatically, so that a new block is generated every 600 seconds.

When does bitcoin halving take place?

So far, bitcoin halving has only been carried out 3 times. The first unofficial halving took place on the day of the release of the cryptocurrency Bitcoin on January 3, 2009. The block reward at that time was 50 Bitcoin (BTC). A total of 10.5 million Bitcoin were already in circulation at the time.

The first official halving took place on November 28, 2012. From then on, the reward halved to 25 BTC per block generated. A further 5.25 million bitcoins were mined between the first and second halving. The last halving so far took place on July 9, 2016. The block reward for the miners halved again and was now 12.5 BTC. In the almost 4 years since the second halving, 2.625 million new bitcoins were created.

The third halving will take place in the 2nd week of May 2020. The block reward is halved to 6.25 BTC from this point. Between the second and third halving, 1.312 million new bitcoins were created. The following 2 halving are predicted for 2024 and 2028.

What will happen when all 21 million Bitcoin are mined?

• Bitcoin halving will repeat every 210,000 blocks produced by 2140. At this point, all 21 million should have been mined.

• Once all 21 million Bitcoin have been generated, miners will no longer receive new Bitcoin as a reward for their confirmed transactions. The miners still receive fees for confirming the respective transactions from the Bitcoin sender.

• Experts estimate that Bitcoin will become deflationary in 2140. That means the price of the cryptocurrency is falling. The reason for the assumption is that many Bitcoin will be lost by then.

What is the purpose of Bitcoin Halving?

Bitcoin halving takes place because it was programmed in the software. In January 2009, a person or group of people created the first and most successful cryptocurrency Bitcoin under the pseudonym Satoshi Nakamoto.

There is no reason behind the halving. However, people suspect a strategy behind it. In the beginning, the miners are rewarded for their work quite quickly, but this diminishes with each halving. The block rewards are therefore halved approximately every 4 years due to the programming. The more the network grows, the more the value of Bitcoin increases. At the same time, the miner's reward is reduced.

Michael Dubrovsky, co-founder of mining R&D nonprofit PoWx: “The theory says that this means that fewer bitcoins are available for purchase and miners have fewer bitcoins for sale”. It is a lengthy process to reduce the bitcoins to be issued until there are no more new bitcoins to mine. ”