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What is Halving?
Halving is a process in which the reward given to miners or validators in a cryptocurrency network is reduced by half after a certain number of blocks are processed. It is a crucial feature of several cryptocurrencies, including Bitcoin (BTC).
The Bitcoin blockchain uses a proof-of-work (PoW) consensus to validate transactions, which rewards miners with a share of the new BTC created in the process and a percentage of the transaction fees as an incentive to participate. Miners can sell their BTC through exchanges for other cryptocurrencies or fiat currencies.
New blocks are added to the chain every 10 minutes. The meaning of halving is that after the creation of every 210,000 blocks on the Bitcoin blockchain – which works out to approximately every four years – the reward is reduced by half.
The frequency of such events is determined by the number of blocks on the chain rather than specific dates, so estimated halving dates can change slightly based on the pace of block creation.
Blockchains that were created from a hard fork, or spinoff, from the Bitcoin blockchain – such as Bitcoin Cash (BCH), Bitcoin SV (BSV), and Litecoin (LTC) – or use its source code also experience halvings.
Key Takeaways
- Halving is a scheduled event in which the reward for mining or validating transactions in a cryptocurrency network, like Bitcoin, is reduced by half.
- Bitcoin halvings are triggered every 210,000 blocks, limiting the supply of new BTC to control inflation and reinforce Bitcoin’s scarcity.
- As Bitcoin’s supply approaches its limit of 21 million coins, halvings will continue until around 2140, emphasizing its finite supply model.
- Each halving significantly affects miners by reducing their rewards, prompting changes in mining efficiency and operational costs to remain profitable.
- Market effects of halving events can include price increases due to reduced supply; however, other economic factors also influence price movements.
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Bitcoin Halving History
- In 2009, when the blockchain went live, the block reward was 50 BTC.
- In November 2012, at a block height of 210,000, the reward was reduced by half to 25 BTC.
- In July 2016, at a block height of 420,000, the reward was further reduced to 12.5 BTC.
- In May 2020, at a block height of 630,000, the reward was cut again to 6.25 BTC.
- In April 2024, at a block height of 840,000, the reward was reduced to 3.125 BTC.
- In March 2028, at a block height of 1,050,000, the next BTC halving is expected to take place, reducing the reward to 1.5625 BTC.
By May 2021, the total BTC created had already reached 18.7 million, close to 90% of the total supply. The reward is scheduled to reach zero around May 2140. Miners will still receive a share of transaction fees as an incentive to process blocks.
How Does Halving Work?
The Bitcoin cryptocurrency was designed with a cap on its circulating supply of 21 million coins. The 210,000-block cycle is an integral part of Bitcoin’s design and is hardcoded into its protocol. Given that the average time to mine a block is approximately 10 minutes, this translates to a halving roughly every four years.
The reduction in block rewards directly impacts miners’ incentives. As the reward is halved, miners receive fewer Bitcoins for their efforts.
Why Does Bitcoin Halving Occur?
BTC halving is fundamentally tied to its finite supply model. Unlike traditional fiat currencies, which can be printed endlessly Bitcoin’s supply cap creates scarcity, an intentional design choice by Satoshi Nakamoto, the anonymous creator of Bitcoin, to support the coin’s value over time.
Halving the value of block rewards is intended to limit the supply of new coins so that mining does not become an inflationary influence.
Reasons for Bitcoin Halving
The primary reasons behind Bitcoin’s halving include the following:
Why Does Bitcoin Halving Matter?
Bitcoin halving is significant to investors, miners, and the broader cryptocurrency community, as it affects supply, demand, mining dynamics, and prices for BTC, as well as other cryptocurrencies affected by market sentiment.
Bitcoin’s scarcity narrative is reinforced through halving events, emphasizing its store of value characteristics. This narrative attracts investors seeking an asset with a capped supply, especially in the face of inflationary pressures affecting traditional fiat currencies.
Non-Bitcoin Halvings
BitcoinSV and Bitcoin Cash are also due to experience their next halvings in 2024. However, other blockchains run on different halving schedules from Bitcoin’s halving dates.
The Litecoin blockchain was launched in 2011 from a copy of the Bitcoin source code but with a 2.5-minute block processing time. As this is faster than Bitcoin’s 10-minute processing time, the block reward is halved every 840,000 blocks to maintain a four-year schedule.
The first Litecoin halving was in 2015, when the reward was cut from 50 LTC to 25 LTC, and the second in 2019 cut the reward to 12.5 LTC. The next Litecoin halving is scheduled for August 2023 to take the reward down to 6.25 LTC. The Litecoin block reward is expected to drop to 0 by 2142, as it is running two years behind Bitcoin.
Halving on the Dash blockchain occurs every 210,240 blocks, resulting in a reduction in the mining reward every year.
Selected Block Reward Halvings Schedule
| Cryptocurrency | Expected Halving Date | Blocks Between Halvings |
| Bitcoin (BTC) | March 2028 | 210,000 |
| Litecoin (LTC) | July 2027 | 840,000 |
| BitcoinSV (BSV) | March 2028 | 210,000 |
| Bitcoin Cash (BCH) | March 2028 | 210,000 |
| Dash | July 9, 2024 | 210,000 |
| Zcash | November 2025 | 840,000 |
| Verge | June 15, 2024 | 500,000 |
How Does Halving Affect Crypto Mining?
As halvings are scheduled by block height, miners know when to expect the reduction in rewards and can plan their mining activity and equipment purchases accordingly.
Reducing rewards by half can increase competition and potentially force inefficient miners out of the network. In the past, however, the value of cryptocurrencies such as BTC has risen in fiat currency terms following Bitcoin’s halving, allowing miners to continue operating profitably.
Over time, miners’ earnings will depend on transaction fees, which are determined by how much the blockchain is used for transactions and applications.
The adjustments in mining dynamics contribute to the overall health and security of the Bitcoin network.
How Do Halvings Affect Crypto Prices?
As prices for cryptocurrency coins are influenced by supply and demand, the reduction in the creation of new coins that come with each halving tends to support higher prices.
For instance, the Bitcoin halving chart below shows the BTC price has climbed after each of its halvings, and in the period surrounding its most recent halving, it soared from $5,000 in March 2020 to over $60,000 a year later.
However, an analysis from digital asset investment firm Greyscale Associates states: “While it may be tempting to view Bitcoin’s halvings as a catalyst for price appreciation… Bitcoin’s price has historically followed an upward trajectory surrounding each halving event, but attributing these price increases solely to the halving oversimplifies the complex dynamics at play.
It serves as a predictable, scheduled event within the Bitcoin ecosystem, around which a multitude of unpredictable factors swirl. Understanding these drivers can equip us with a more comprehensive perspective, fostering informed decision-making within the world of Bitcoin.”
How to Prepare for Bitcoin Halving
With Bitcoin halving events occurring roughly every four years and price volatility typically increasing around that time, it is crucial for crypto investors and enthusiasts to prepare adequately.
One way to do this is to stay informed about the scheduled halving date and understand the potential impact on the market. As each halving occurs with the mining of 210,000 blocks, the date is not fixed but depends on the block creation rate. Keeping track of the latest Bitcoin data and new coverage will ensure that you are up to date on the schedule.
Understand how the BTC price moved before and after previous halving events and how this affected market behavior. Although historical data does not necessarily predict the way the market will move in the future, it can indicate potential trends and market sentiment – which can help you make informed decisions about your investments.
It is important to ensure that your cryptocurrency portfolio is diversified among other cryptocurrencies or assets to help mitigate the risks associated with volatility surrounding halving events. Set investing goals and strategies before the halving event based on your risk tolerance so that you have clear entry and exit points to follow that are not clouded by emotion.
Common Misconceptions About Bitcoin Halving
There is a common assumption that a Bitcoin halving will result in an immediate price surge. While historical data suggests that halving events often precede bull markets, the correlation does not guarantee causation. Market sentiment and macroeconomic factors can also affect the Bitcoin price around the time of halving.
Another misconception is that halving directly affects Bitcoin miners’ profitability. While it does reduce block rewards, miners’ profitability is influenced by various factors, including network difficulty, operational costs, and transaction fees.
As their reward is reduced by half, to remain profitable following a halving, miners need to optimize their operations, such as by upgrading their mining equipment or increasing their energy efficiency to maximize their computational resources and reduce their costs. And while the block reward is reduced, growing Bitcoin transaction volumes can increase the value of transaction fees miners receive.
While there are concerns that halving can reduce the security and stability of the Bitcoin network, it is designed to adjust the mining difficulty in response to changes in the hash rate. So if miners leave the network as the lower rewards make their operations unprofitable, the difficulty will decrease dynamically so that the rate of block creation remains stable at around 10 minutes.
The Future of Bitcoin Halvings
As Bitcoin approaches its maximum supply of 21 million coins, the significance of halving events will likely intensify. Bitcoin halvings are expected to take place in 2024, 2028, and every four years until the maximum supply is likely reached in 2140 and the block reward is gradually cut to zero.
The increasing mainstream adoption of cryptocurrencies, particularly following the launch of Bitcoin exchange-traded funds (ETFs), may lead to greater awareness and anticipation surrounding halving events.
