Halving
What Is Halving
Halving is a process where the reward for mining new Bitcoin blocks is cut in half at regular intervals, typically every four years or every 210,000 blocks. For instance, when Bitcoin launched in 2009, miners received 50 BTC per block. This reward dropped to 25 BTC in 2012, then to 12.5 BTC in 2016, and to 6.25 BTC in 2020. The most recent halving in 2024 reduced the coinbase transaction reward to 3.125 BTC.
The purpose of halving is to control the number of new bitcoins entering the market and keep the total supply capped at 21 million. By slowing down the creation of new bitcoins, halving acts as a deflationary measure, unlike fiat currencies, which can be printed in unlimited amounts and often cause inflation. Initially, high rewards motivate miners to join and secure the network. As rewards decrease, transaction fees are expected to become a more important source of income for miners.
Investors and the cryptocurrency community closely watch halving events because they can affect the market. The idea behind halving is based on supply and demand; as the supply of new bitcoins decreases, if demand stays the same or goes up, the price is likely to increase. This scarcity is why Bitcoin is often compared to precious metals like gold.