“Bitcoin Halving” is the halving of the reward that a Bitcoin miner receives for adding new blocks to the blockchain. Currently, this figure stands at 12.5 BTC, which is received by the miner who finds the new block using gross calculation force using specialized equipment for this activity. Reducing this reward amount also means a cut in half of the issuance of new Bitcoins.
To help you understand we have explained the Bitcoin halving in 10 easy steps:
1. Bitcoin is a blockchain with a limited supply:
The Bitcoin protocol cuts the bitcoin block reward in half. Every time Bitcoin halves, miners start getting 50% less BTC to verify transactions.
Currently, about 18 million BTC have been mined and there are only 21 million BTC which can be mined in total. Once miners will unlock these Bitcoins, the supply on the planet will be tapped out essentially, unless BTC’s protocol is changed to allow for the next larger supply.
2. Bitcoin has been designed so a new block is found approximately every 10 minutes:
As you already know, Bitcoins are generated through the digital mining process. Furthermore, Bitcoin is an exclusively digital currency that does not exist in the physical world, is decentralized. No government or entity behind it regulates its issuance.
In this context, Bitcoin is designed and programmed to produce a fixed amount of coins approximately every 10 minutes. It is the users of Bitcoin themselves, those who wish to provide computing power, who are responsible for carrying out this process, called mining.
3. On Bitcoin blockchain, every new block found by a miner will reward with a new coin that is added to the total supply:
Bitcoin mining is the process in which new Bitcoin is added to the total supply. Mining also serves to secure the BTC system against fraud transactions. Miner provides processing power to the BTC network in exchange for the opportunity to be rewarded Bitcoin.
Miners authorize the new transaction and record them on the global total ledger. A new block contains transaction which occurred since the last block is mined every 10 minutes, thereby adding those transactions to the blockchain.
4. First blocks were rewarding 50 coins back in 2009:
Did you know back in 2009, the first blocks were rewarding 50 coins to the miner that found it? At the genesis bloc in 2009, miners used to receive 50 Bitcoin as a reward. It was then reduced to 25 Bitcoins in 2012 and again to 12.5 Bitcoins in 2016. Now in 2020, miners will see their rewards cut in half one more time.
5. Reward divided by 2 into every 210,000 blocks:
After every 210,000 blocks, the rewards given to the miner is divided by 2. This is the process called Bitcoin Halving.
In 2016, each block was equivalent to a reward of 12.5 new BTC, while in May 2020, it will be 6.25 BTC. This division occurs every 210,000 blocks.
In this way, the protocol ensures that Bitcoins are not issued before the stipulated time, mathematically controlling inflation. Also, this mechanism guarantees the progressive increase in the total supply of the cryptocurrency, whose limit is 21,000,000 BTC.
6. The rewards went from 50 to 25 back in 2012, then from 25 to 12.5 in 2016:
Since Bitcoin was first created, the halving has been programmed deep into its source code. In doing so, Satoshi Nakamoto stated that there will be 21 million Bitcoin. Every 210,000 blocks, the block reward is halved. So, in the genesis block in 2009, the miners received 50 BTC as a reward. This was reduced to 25 BTC in 2012, and again to 12.5 BTC in 2016. Now, miners will have their rewards cut in half once again with 6.25 in 2020.
7. On the 12th of May 2020, on Block number 840,000, the reward will go from 12.5 to 6.25:
Infrastructure is predictable by design and we know that the BTC inflation rate will drop from 3.6% to 1.8% annually after halving in the coming days. Bitcoin’s halving is expected to occur around May 12, 2020, and there will be 61 halvings left after this.
8. Halving technically reduce the selling pressure from the miner:
People are excited about halving because it technically reduces the selling pressure from the miners. However, many experts have also suggested positive scenarios. Miners capitulation has been a buy signal historically, and a bull market follows always periods of recession, as the post-BTC-halving world could see miners’ outflow and a reward redistribution under lower sell pressure that could result potentially in a BTC price increase.
9. Every halving brings media attention to people, helping more people to jump in and invest:
Halving always draws public attention and media coverage. The demand for Bitcoin will move higher simply because this is the gateway into crypto for new investors.
Halving accelerating demand growth plus constrained supply growth will lead to a higher Bitcoin price in 2020.
10. First 2 halvings were followed by a huge bull market, so people hope it will happen again:
It is not an exact science, but it is a fact that the first 2 halvings were followed by a huge bull market, so people hope it will happen in 2020 as well. So, again people are eager for halving day.
Meanwhile, Google searches for “Bitcoin halving” increase. It should be noted that during the last halving, in 2016, these searches reached their historical record, and even though the price did not rise immediately, it made itself felt.
The effect that the halving will have cannot be predicted since the market players are independent, but it is possible that new investors will enter, pushed by the FOMO (Fear Of Missing Out).