The Bitcoin Halving
The Bitcoin Halving event as explained by community member Joshua Owen
Satoshi Nakamoto is considered by many as one of the greatest visionaries of our time. Whilst questions regarding his true identity spark conspiracy after conspiracy, it is no doubt that Bitcoins founder saw money from a perspective not many ever did.
Satoshi released the Bitcoin White Paper just after the global economic crisis of 2008. This white paper detailed a brand new type of currency that was completely digital and completely eliminated the need for trust in a third party such as a bank to facilitate the transaction for you.
Satoshi outlined that that there would be a limited supply of Bitcoin - 21 million exactly - meaning that unlike todays fiat currencies it would be deflationary and valuable. Bitcoin uses scarcity to remain as such.
Bitcoin completely eliminates the need for 3rd parties through use of blockchain technology, takes only seconds to validate large payments from all corners of the globe, and, unlike the dollars and pounds of today, is deflationary.
Where mining comes in:
This new Bitcoin cryptocurrency Transactions would be recorded using a peer-to-peer system whereby members of the bitcoin community validated each others bitcoin transactions. This is called Bitcoin mining. Thousands of these transactions, once validated, are encrypted and grouped into groups called a blocks. This block is in turn added to a global general ledger of all transactions that have been validated by the
global bitcoin community. Thus it is called the Blockchain.
However, miners do not validate thousands of transactions for fun. Miners are
incentivised to keep mining by being rewarded with bitcoin each time they are the first to validate a transaction. This reward system will carry on until 2140, which is when the proposed limit of Bitcoins supply (21 million Bitcoin) is said to be reached.
Halving is the act of cutting the rate at which new bitcoins are released into circulation in half. Unfortunately for miners, this means that for every 210 000 blocks mined globally, their reward is halved. This is intended to simulate diminishing returns, which in theory should boost demand. Halving is highly significant because it represents a drop in the production rate of new bitcoins as it approaches its finite supply - indicating that more and more people are holding the digital asset.
When did the Halvings occur?
There have been three halvings as of June 2023:
- Nov. 28, 2012, from 50 to 25 bitcoins
- July 9, 2016, from 25 to 12.5 bitcoins
- May 11, 2020, from 12,5 to 6.25 bitcoins
The next halving:
The time taken to reach the next bitcoin halving will vary. The Bitcoin algorithm seeks to find new blocks every 10 minutes, however, some blocks take a longer time to find and others shorter.
If blocks take 10 minutes to mine on average, the next bitcoin halving is predicted take place in April of 2024.