What is the bitcoin block halving?What is the bitcoin block halving?

A bitcoin block halving means that the reward for miners is cut in half. Miners receive bitcoin as a reward for adding new blocks to the blockchain. On average, a new block is added every 10 minutes. Because of the halving, fewer new bitcoins come into circulation.

Since the most recent halving, miners receive 3.125 bitcoin per block. Before that it was 6.25 bitcoin. A halving like this takes place roughly once every four years.

The halving matters because bitcoin has a maximum supply of 21 million. So new bitcoins can't be issued indefinitely. By lowering the reward step by step, the issuance of new bitcoin is slowed down further and further.

That makes the supply of bitcoin predictable and transparent. Anyone can see how much new bitcoin is added, and when that issuance will be halved again.

New bitcoins come into circulation through a process called 'mining'.

Miners collect bitcoin transactions into a new block and try to add that block to the blockchain. To do so they provide computing power. The miner who finds a valid block first gets a reward: the block reward. That reward consists of new bitcoin plus transaction fees.

So new bitcoin isn't created at random, but issued according to fixed rules. Roughly every 10 minutes a new block is added. Roughly every four years the amount of new bitcoin that miners receive is halved. That's called the halving.

The bitcoin halving takes place roughly every four years. Not on a fixed date, but each time after 210,000 new blocks.

The last halving was on 20 April 2024. The next halving is expected around April 2028, at block 1,050,000. The exact date isn't fixed, because blocks are found on average every 10 minutes. Sometimes that goes a little faster, sometimes a little slower.

At the next halving the reward for miners drops from 3.125 BTC to 1.5625 BTC per block.

In the chart you can see how the number of bitcoin slowly grows towards the maximum limit of 21 million. The blue line shows how much bitcoin has been issued in total. The orange line shows how quickly new bitcoin is added. The last new fractions of bitcoin are expected to come into circulation around 2140.

For miners the halving has direct consequences. After every halving they receive less new bitcoin for adding a block to the blockchain. Their reward in bitcoin is halved, while the work stays the same.

At the same time, costs for things like equipment, electricity and maintenance simply carry on. That makes working efficiently more important. Miners with low costs can often absorb a halving better than miners who produce at higher cost.

Alongside the block reward, miners also receive transaction fees. In the long run those transaction fees become increasingly important, because the amount of new bitcoin per block keeps decreasing.

The bitcoin price is set by supply and demand. That demand and supply are in turn influenced by all kinds of factors, such as market sentiment, interest rate developments, regulation, economic uncertainty and news from the crypto market.

The halving mainly plays out on the supply side. After a halving, fewer new bitcoins come into circulation because miners receive a lower block reward. If demand stays the same or rises, that can have an effect on the price.

Even so, a halving doesn't automatically mean the bitcoin price goes up. The market often looks ahead, and other factors can weigh more heavily at that moment.

On top of that, the relative impact of each halving gets smaller. There are already a lot of bitcoins in circulation, so the drop in new supply matters less and less compared with the total amount of bitcoin on the market. The halving therefore remains important for the bitcoin mechanism, but it doesn't have to affect the price in the same way in every cycle.

In the past, halvings were followed by periods in which bitcoin rose sharply in value. The period after the 2024 halving has so far been less spectacular than earlier cycles. That shows past price movements offer no guarantee for the future.

So see the halving mainly as part of bitcoin's supply mechanism, not as a price prediction.

That's by design. Bitcoin has a maximum supply of 21 million. By lowering issuance further and further, the total number of bitcoin slowly grows towards that limit.

Roughly every four years, the amount of new bitcoin miners receive per block is halved. As a result, after each halving less new bitcoin is added than in the period before.

This makes bitcoin different from money that central banks can create more of. With bitcoin, the issuance schedule is fixed in the code. Anyone can check how much bitcoin is in circulation and how quickly new bitcoin is added.

So the decreasing issuance creates scarcity and predictability. That's one of bitcoin's most important characteristics.

The final halving lies far in the future. The last new fractions of bitcoin are expected to come into circulation around the year 2140. From that moment on, no new bitcoin will be issued.

That doesn't mean miners disappear. Miners are still needed to process transactions and add new blocks to the blockchain. They just won't receive new bitcoin as a block reward any more.

Instead, transaction fees become more important. Users pay transaction fees to have their transactions processed, and those fees go to miners. That's how the network keeps functioning, even after the maximum supply of 21 million bitcoin has been reached.