Bitcoin Halving

Bitcoin has a predetermined supply schedule that caps the total supply of bitcoin at 21 million bitcoin (BTC). As explained in our Mining post, miners are rewarded with bitcoin whenever a block is mined. This is called the “block reward.” Mining bitcoins is the only way new bitcoins are created and entered into circulation.

Every four years (or 210,000 blocks, to be exact), the issuance rate of Bitcoin, the block reward, is cut by 50% in an event called the “Halving.” The first 4 years of Bitcoin, the block reward was 50 BTC. i.e., 50 new BTCs were “created” or “mined” every block. The first halving was in 2012, and the block reward dropped to 25 BTC, then to 12.5 BTC in 2016, then to 6.25 BTC in 2020. The next halving is expected at block height 840,000 on April 20th 2024, and the block rate will drop to 3.125 BTC.

The block reward will continue to halve until it eventually reaches zero in the year 2140! This is what is meant by a predetermined supply schedule. Meaning after 2140, no new bitcoin will ever be mined, and the miners will only make money by collecting transaction fees for sending and verifying translations on the Bitcoin network.

This supply cap is what gives bitcoin its “hard money” properties, and it is why bitcoin is compared to gold. Fixed supply assets, like gold and bitcoin, are considered to have strong “store of value” properties because regardless of how much demand increases, supply is fixed, thereby pushing value (price) up.