Halving is the process of halving the rewards of mining bitcoin after mining 210,000 blocks. As more blocks are mined, the reward of mining bitcoin is reduced more and more, for that reason halving ensures that the amount of circulated bitcoin does not grow forever.
The most recent halving occurred on 11 May 2020, when block 630,000 was mined. As a result of that the block reward dropped to 6.25 BTC.
How Bitcoin Halving Works
Every 210,000 blocks mined, the reward for mining a block is reduced to half. The reward was 50BTC per block for the first 210,000 blocks in bitcoin’s early days. As more blocks were mined, the first 210,000 blocks were mined by 2012, and the reward fall to half to 25BTC.
By 2016, the second set of 210,000 blocks were mined, and the reward fall to 12.5BTC. The latest halving occurred in May 2020, when the 630,000 blocks were completed, and the reward is now 6.25BTC per block.
It takes approximately four years for 210,000 blocks to be mined. For that reason, it occurs in four-year period. The next halving is predicted to take place in 2024.
Why Bitcoin Halving Occurs
The supply of bitcoin is fixed at 21 million. When reaching the 21 million level, the generation of new bitcoins will stop. halving secure the amount of bitcoin, and make sure that the amount of Bitcoin can be mined with each block decreases, leading to make bitcoin price more valuable.
logically, the motivation for mining bitcoin would decrease at the end of each cycle. However, halving are associated with huge surges in the price of bitcoin, which provides miners with the motivation to mine more, even that their income is now halved.
Price increases so miners continue mining. On the other hand, if the price of bitcoin decrease and Blockchain rewards are halved, miners may lose the motivation to mine. It is because mining bitcoin requires high amounts of power and electricity and it is expensive depending in the countries where the miners are.
What’s the connection between Halving and BTC
Historical readings and data confirm that there is a positive relation between halving and Bitcoin price increase.
- First halving: Upon the first in 2012, the price of bitcoin was around $11 and rose to $12. Within a year, the price increased to $1,100.
- Second halving: In 2016, the bitcoin network completed 420,000 blocks, and the second occurred. Bitcoin fluctuated between $500-$1,000 for a few months and then shot up to $20,000 by December 2017.
- Third halving: The third halving took place in May 2020, which marked the beginning of another bull run for bitcoin. When the halving occurred, bitcoin was trading around $9,000. Today, in December 2020, bitcoin is trading near $20,000.
When is the next halving date
The next halving is expected around 2024. It will drop the block reward to 3.125 BTC.
