What is Bitcoin Halving？

The Bitcoin network reduces the amount of bitcoins awarded to miners by 50% roughly every four years. Such events are referred to as Bitcoin halving, which is also known as "the halvening."

What is Bitcoin? What is Bitcoin network? Please refer to the “What is Bitcoin” chapter.

While central banks determine the supply of fiat currencies via monetary policy and can increase or decrease the supply of fiat currencies under different circumstances, the supply schedule of Bitcoin is pre-determined by the Bitcoin algorithm, which is codified and immutable.

There is only one way to issue new bitcoins-via block rewards. The Bitcoin network introduces new bitcoins into circulation by awarding them to miners who process and record transactions.

What are block rewards? How to get block rewards? Please refer to the "What is Mining" chapter.

After every 210,000 blocks mined, or roughly every four years, the block reward given to Bitcoin miners for processing transactions is cut in half. At the beginning, 50 new bitcoins are awarded to miners of a new block, which is reduced to 25 at the first Bitcoin halving.

The first Bitcoin halving occurred on November 28, 2012. After the first Bitcoin halving, half of the bitcoins that would ever exist — 10.5 million — were already out in circulation.

The second halving was on July 9, 2016, and the most recent halving was on May 11, 2020.

The next Bitcoin halving is expected to take place around May 19, 2024.

There will be a total of 32 Bitcoin halving events. The last halving will occur in 2140. Once the 32nd halving is completed, there will be no more new Bitcoin created, as its maximum supply of 21 million will have been reached. Beyond that point, there will be no more block rewards. Miners will just be paid with transaction fees.

Presently, a bit more than 19 million bitcoins (90%+) have been issued.

As determined by block rewards, Bitcoin's inflation rate was 50% in 2011, but after the first halving in 2012, it plummeted to 12%. And the third halving in 2016 reduced it to 4–5%. It now has an inflation rate of 1.77%.

Every halving event has historically resulted in a bull run for Bitcoin. When the block reward is halved, Bitcoin's inflation rate is reduced, meaning there are less new bitcoins available for sale. Assuming demand is constant, Bitcoin halving will directly lead to a higher price for each bitcoin.

After each Bitcoin halving, miners may shift mining power away from Bitcoin network because their reward is cut in half, assuming Bitcoin price remains constant. Fewer miners would mean a less secure Bitcoin network.

However, Bitcoin price typically increased by more than 50% after each Bitcoin halving, which more than compensated for the reduction in mining rewards. As a result, the number of Bitcoin miners was not impacted by Bitcoin halving. Rather, it tends to increase as the increase in Bitcoin price makes mining profitable despite the decrease in per-block rewards. But this may not hold true in future Bitcoin halvings.