WHAT: Halving occurs every 210,000 blocks and reduces the mining reward by 50% each time. It is expected that this process will be completed in 2140 when the last Bitcoins are mined. As rewards shrink miners will be increasingly dependent on transaction fees to stay solvent.
WHY: Satoshi Nakamoto planned an alternative to the unlimited printing of fiat currency by central banks. So he created a system that would cap the number of Bitcoins produced at 21 million following this release schedule. “One of the major faults of traditional, “fiat”, currencies controlled by central banks is that the banks can print as much of the currency as they want, and if they print too much, as happened in Weimar Germany in 1923 and Zimbabwe in 2007 (among many other unfortunate examples), the laws of supply and demand ensure that the value of the currency starts dropping quickly. Because the only use for money is to exchange it for something else later, a currency that is rapidly decreasing in value becomes even less valuable for that very reason, leading to a hyperinflationary spiral.” (R1)
EXAMPLE: In May 2020 the reward will go from 12.5 to 6.25 bitcoins taking place at block 630,000. The next halving will occur at block 840,000 in 2024.
Pic: https://ihodl.com/infographics/2018-04-09/chart-day-bitcoin-reward-halving-and-price-history/« Back to Glossary Index