What is a block halving?
The issuance of new bitcoins is a central part of the Bitcoin system. When a new block is added to the blockchain, the miner who added the block is rewarded with a certain number of bitcoins. This reward started at 50 bitcoins per block, and it is halved every 210,000 blocks, which takes about four years. The current block reward is 6.25 bitcoins, and it is set to decrease to 3.125 bitcoins after the next halving. By the year 2140, the block reward will be zero..
Why was it done?
The premise of Bitcoin is that it is a deflationary currency, like gold. This means that the issuance of bitcoins will decrease over time, making them scarcer and potentially more valuable. As demand for bitcoins increases, the price is likely to increase as well. In contrast, fiat currencies like the US dollar tend to lose value over time due to inflation, which is caused by an increase in the money supply. This can be seen in the example of housing prices, which have generally increased over time. The use of Bitcoin as a hedge against inflation is based on the idea that its scarcity will protect it from the effects of monetary debasement.
One of the key features of Bitcoin is its predictable monetary supply. Unlike fiat currencies, which are subject to inflation due to central banks' ability to print more money, the supply of bitcoins is predetermined and limited. This means that the value of a bitcoin is less likely to be affected by changes in the money supply, making it a potentially attractive option for people looking to protect their wealth from inflation. Additionally, the predictable supply of bitcoins can provide stability and predictability for the cryptocurrency's price, making it easier for users to plan and budget accordingly.
The issuence of Bitcoin
Bitcoin is a decentralized cryptocurrency that operates on a peer-to-peer network. This means that the issuance of new bitcoins is controlled by the network itself, rather than by a central authority like a central bank. The network follows a set of predetermined rules, known as consensus rules, which govern the issuance of new bitcoins. These rules include a maximum supply of 21 million bitcoins, a target of 10-minute block intervals, and a halving event that occurs every 210,000 blocks. The block reward, which starts at 50 bitcoins, is also halved at each halving event. Any changes to these consensus rules must be approved by a consensus of the network's participants.
Halving event dates
Halving events are a key feature of the Bitcoin network. These events occur every 210,000 blocks and are designed to control the supply of new bitcoins and ensure that they are issued at a predictable rate. The first halving event occurred on November 28, 2012 at block height 210,000. The second halving event occurred on July 9, 2016 at block height 420,000. The third halving event occurred on May 11, 2020 at block height 630,000. Each halving event reduces the block reward that miners receive for adding new blocks to the blockchain, which in turn reduces the rate at which new bitcoins are issued. This helps to maintain the predictable and limited supply of bitcoins that is one of the key features of the cryptocurrency.