Bitcoin halving

How new bitcoins are coined

• Bitcoin's anonymous inventor Satoshi Nakamoto decided that only 21 million bitcoins (BTC) would ever exist. They wanted new coins to be released gradually into the market

• new BTC are given to bitcoin miners as their bitcoin block reward when they verify blocks of transactions. To begin with, the reward stood at 50 BTC per block

• rewards stay fixed for 210,000 blocks (about 4 years), and then are cut by 50%. The halving is the moment (block creation) when this cut happens

• there will only ever be 32 bitcoin halving events. Once the 32nd halving is completed, there will be no more new BTC created, as its maximum supply of 21 million will have been reached. Why?

• each BTC is divisible to the 8th decimal place, so each BTC can be split into 100,000,000 units. Each unit of BTC, or 0.00000001 BTC, is called a satoshi. A Satoshi is the smallest unit of Bitcoin. Since $50 \cdot 2^{-32} = 1.16 \cdot 10^{-8}$ in 32 halving events we get the smallest unit of bitcoin, the satoshi.

So far we had 4 halving events:

1. November 28, 2012 — Reward down: 50 BTC to 25 BTC

2. July 9, 2016 — Reward down: 25 BTC to 12.5 BTC

3. May 11, 2020 — Reward down: 12.5 BTC to 6.25 BTC

4. April 20, 2024 — Reward down: 6.25 BTC to 3.125 BTC

The halving event has economic repercussions for both Bitcoin miners and the broader market. Miners must modify their operations to be profitable with a lower block reward, which increases competition and drives away less productive miners. This, in turn, can impact the overall security and decentralization of the network. Usually, there is an increase in volatility for Bitcoin following the halving. The supply of available Bitcoin decreases, which raises the value of Bitcoin yet to be mined, making it a more attractive asset to investors. This typically starts a bull run (a period of increasing prices) for Bitcoin.