Satoshi Nakamoto, a person or group whose identity remains unknown to this day, created the digital currency Bitcoin on Jan. 3, 2009. A whole cryptocurrency industry was born out of it, one that has become increasingly mainstream.
Bitcoin prices have been on a roller-coaster ride over the past few months. But something coming soon that’s known as a Bitcoin “halving” event could shoot them to new highs throughout the year. Bitcoin halving, a technical event that occurs every four years and cuts the reward for mining new Bitcoin by half. The feature is important to understand how Bitcoin functions.
In mid-April, the reward miners get for minting new Bitcoin will be cut in half, from 6.25 bitcoin to 3.125. This happens every four years and will continue until all 21 million Bitcoin are mined. While the exact date of the halving event remains unclear, it’s set to take place on or before April 19.
Halving was written into Bitcoin’s code from the beginning to ensure scarcity and safeguard against inflation. Previous halving events coincided with huge Bitcoin price increases.
Here’s what to know about the coming Bitcoin halving, as well as what it will mean for Bitcoin’s price and more.
What is Bitcoin mining? How is Bitcoin generated?
Bitcoin is generated by miners who use computer hardware to solve complex mathematical problems and verify transactions on the blockchain network. In return, miners receive a predetermined amount of Bitcoin for each block of transactions they process.
The reward, which is given to miners who verify the transaction, is a way to create more Bitcoin. The first Bitcoin block, also known as the Genesis Block, was created by Nakamoto in 2009 and was rewarded with 50 Bitcoin.
Why is Bitcoin halving important?
Bitcoin’s supply is limited to a maximum of 21 million coins. This means no additional coins will be generated or created after reaching that 21 million limit. Nakamoto introduced the concept of Bitcoin halving to limit the quantity of the cryptocurrency and make it more valuable to combat inflation. That’s why Bitcoin halving is important, as it prevents the uncontrolled creation of Bitcoin.
When were the other Bitcoin halving events?
The Bitcoin blockchain creates 210,000 new blocks in about four years, which is the standard established by its creators. The first reward was 50 bitcoin in 2009, when Bitcoin’s price was almost 0.
- The first Bitcoin halving happened on Nov. 28, 2012, when the reward for mining a block was reduced from 50 Bitcoin to 25. At that time, Bitcoin’s price was $12.
- The second halving event occurred on July 9, 2016, when the reward was reduced from 25 Bitcoin to 12.5. The price of the cryptocurrency was then $658.
- The third and most recent halving occurred on May 11, 2020, when the Bitcoin incentive was reduced by half to 6.25 Bitcoin. At that time, Bitcoin was at $8,601.
Bitcoin’s next halving is expected to take place on or before April 19, reducing the mining reward to 3.125 Bitcoin. The process will continue until roughly 2140. This means that after the 2024 halving, 29 more halving events will occur before the final reward of just one satoshi (the smallest unit of the Bitcoin) is granted.
What happened after the previous Bitcoin halving events? Is now a good time to buy Bitcoin?
Bitcoin halving has historically boosted the price of the cryptocurrency.
For instance, after the first Bitcoin halving in 2012, the price was $12. It went up to $44 in 100 days, and then $135 in 300 days.
Similarly, after the 2016 halving event, the flagship cryptocurrency went from $658 to $1,551 in 300 days.
And in the most recent halving of 2020, the price of $8,601 went to $50,941 within 300 days.
CoinGecko, a crypto tracking website, finds that Bitcoin’s price has increased by 103,877% since 2013. Bitcoin was trading at about $70,000 in mid-April, just 4.4% off its all-time high reached on March 14, 2024.
The upcoming Bitcoin halving event and the inflows into the spot Bitcoin ETF market have spread excitement among investors, and some key figures in the crypto industry believe Bitcoin’s price can go to $100,000.
How long will Bitcoin mining go on?
Satoshi Nakamoto set a cap on the supply of Bitcoin at 21 million, which limits the number of Bitcoin that can ever exist. As of March 2024, there were approximately 19.65 million Bitcoin in circulation, with only about 1.35 million left to be released through mining rewards. It is estimated that by 2140, when all 21 million Bitcoin will be mined, that the network will stop creating new bitcoins.
What will happen to miners if all Bitcoin are mined?
Bitcoin miners generate revenue through block rewards and transaction fees. Once all 21 million Bitcoin have been mined, the block reward will decrease to zero. But miners could continue to earn an increasing portion of their income from transaction fees.
Will there be a loss to miners as the reward is halved?
After the Bitcoin halving, the block reward for miners is reduced by half. This year, it will be reduced from 6.25 Bitcoin to 3.125 Bitcoin.
In the short run, the reduction in block rewards could potentially impact miners, requiring them to invest in more advanced mining equipment to remain competitive. That said, Bitcoin’s price will likely rise, as it always has after previous halvings. So that means miners may earn enough profit even with a reduced Bitcoin reward.
How is Bitcoin halving going to impact the environment?
Bitcoin mining is notorious for consuming energy, leading to concerns among climate activists seeking to ban it. An online tool from the University of Cambridge says that Bitcoin’s annual energy consumption is equivalent to that of Switzerland.
Experts have tried to find more eco-friendly ways to make Bitcoin, and there are concerns about how halving will impact electricity consumption.
With every Bitcoin halving, the competition to verify transactions increases. This forces miners to upgrade to advanced ASIC miner rigs that maximize productivity and minimize power consumption. So Bitcoin halving can help a little — but it’s definitely not “a greener way” for generating Bitcoin.