The Bitcoin Halving
Bitcoin’s supply changes are not determined by miners or governments.
Contents 6 sections
Instead, the issuance schedule is fixed in advance in Bitcoin’s code to cut the block reward roughly in half every four years.
How Bitcoin Issuance Works
New bitcoin enters circulation as the block reward paid to the miner of each block. Ten minutes after the previous block, the next block is released and the miner who found it gets the reward, currently 3.125 BTC per block.
The Bitcoin protocol cuts that reward in half every 210,000 blocks. That works out to roughly four years at the 10-minute block time that Bitcoin targets.
The initial block reward was set at 50 new BTC paid to each miner. After the first 210,000 blocks, miners could only earn 25 BTC each. Then the reward fell to 12.5 BTC, then to 6.25 BTC, and then to the current 3.125 BTC per block at the halving of April 2024. After the next halving, miners will receive 1.5625 BTC per block. This will continue halving until the subsidy approaches zero — sometime around the year 2140.
What Changes on Halving Day
As bitcoin approached block 840,000 on the network, crypto commentators made predictions about the halving. In fact, as a supply-side event, everything that is known about the halving, including its impact on the amount of bitcoin entering circulation and miner revenues, is public knowledge as soon as it occurs.
The halving is visible on a single block explainer site such as mempool.space that enumerates its transactions or on a block explorer like Blockstream.info or Blockchain.com.
When a halving occurs, the network’s miners wake up to discover that the reward for their work has been suddenly slashed. It cuts miner subsidy revenue overnight.
Why the Supply Cap Exists
Bitcoin’s supply schedule is fixed in the protocol, so the total supply converges to 21 million coins. Not exactly 21 million coins – just a shade under 21 million due to how the Bitcoin protocol rounds. After the final issuance, bitcoins will continue to enter circulation for many years.
If the price doesn’t boom in response to the mini-market panic caused by the halving, miners may need to turn off mining rigs. When hash power leaves, Bitcoin’s difficulty adjusts. This can put pressure on miners 90 days after the halving, when the adjustment occurs. Miners may then need to upgrade their equipment to remain profitable after their revenue drops.
What the Halving Means for Miners
Besides the block subsidy, transaction fees also contribute to miner revenue. Currently, a small amount of bitcoin is collected as fees, often under $1 per block. That number should grow as a percentage of mining earnings with each halving. But the subsidies are slashed to a paltry 3.125 BTC per block going forward. In an uncertain economy — which is to say the crypto economy — that may not be enough. In theory, transaction fees alone are enough to subsidize security–but only after fees have grown significantly and subsidies have shrivelled.
Miner income depends on bitcoin mining, but bitcoiners can still send payments at a very low cost. It feels like having your cake and eating it, but these two data points aren’t diametrically opposed.
Miners used to be able to earn more
What the Halving Does Not Tell You
The halving is a supply-side event that everyone can see in advance, so it says nothing certain about price or supply in any given halving period. At most, Bitcoiners could correlate historical halvings with increased market excitement and choppy. But the market dynamics are far too sensitive to on-chain variables to predict anything for certain.
Bitcoin Halving FAQ
Bitcoin has halved several times, but when will the next halving occur?
What is Bitcoin halving?
Bitcoin halving is a periodic (approximately every 210,000 blocks) halving of the supply of new Bitcoin entering the market. Since block numbers trivially count up, crypto enthusiasts also call a halving a "block reward halving."
How many Bitcoin halvings are there?
There have been three Bitcoin halvings (in 50 BTC/block, 25 BTC/block, and 12.5 BTC/block).
How are Bitcoin halvings calculated?
The block reward halves each 210,000 blocks.
