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Bitcoin Halvening

A new Bitcoin is created when the blockchain rewards an individual (miner) for confirming or validating a transaction . The network gives Bitcoin to miners for adding new blocks.

This is reimbursement for the costs of maintaining the network by participating in block building, like electricity and hardware upkeep. Miners typically sell it immediately to cover their overheads, thus releasing new Bitcoin into the ecosystem.

The Halvening is when the network reduces the reward by half. Halvenings happen at intervals of 210 000 blocks, which is approximately once every four years.

Bitcoin miners currently receive 12.5 BTC each time they successfully mine a block. By the end of May 2020 (the next Halvening) they will instead earn just 6.25 BTC .

Satoshi’s  inflation

Unlike fiat currencies, which are generally inflationary, the maximum amount of  Bitcoins  is 21 million. Once the network reaches that limit, no more Bitcoin can be generated.

The idea behind the constant Halvening is to ensure Bitcoin doesn’t suffer from intense inflation as it’s distributed. 

Let’s say Satoshi simply launched the Bitcoin network with the full 21 million supply ready to go. There would be little incentive for its value to rise, as supply would likely outweigh demand.

To encourage sustainable growth, Satoshi chose a logarithmic scale on which to set dates for the Halvenings.

This means that even though 80% of all Bitcoins were already mined in the first 10 years, the final Bitcoin won’t be released until 2140.

We still have over a century of guaranteed incentive for miners to participate in the network, and for the market to figure out just how much Bitcoin is worth.

How does Halvening affect hash rate?

A 50 percent reduction in mining revenue seems like a really bad thing for the ecosystem. But, this is going to be the third Halvening. 

The last one took it's place in 2016, when the blockchain went from releasing 3,600 Bitcoins into the ecosystem every day to 1,800.

In another 480 days, the network will release just 900 new Bitcoins daily.

During the last Halvening,the price didn't actually fall down, but on the other hand, it rose, expecially at a time right before the Halvening itself.

Aside from that, the network was pretty much indifferent. The overall hash rate (the total computing power driving the Bitcoin network) stayed the same.

This means miners did not switch off their equipment en masse in light of earning less rewards, something many had speculated would happen.

You can keep up to date on exactly when the next one will happen with this neat countdown timer.

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