Bitcoin Halving represents a pivotal event in cryptocurrency mining and is considered an important milestone in finance. The halving, a significant event on the Bitcoin blockchain, involves the reduction of the mining reward by half.
Since 2020, miners validating transactions on the network have received 6.25 Bitcoins for each successfully mined block. The next halving, expected in early to mid-2024, is predicted to reduce the block reward further to 3.125 Bitcoins. As time progresses, the impact of each halving will diminish as the block reward nears one satoshi.
A Bitcoin halving event halves the reward for mining Bitcoin transactions. These halvings decrease the rate at which new coins are generated, thus limiting the amount of new supply entering the market.
The most recent halving occurred on May 11, 2020, setting the block reward at 6.25 BTC. The final halving is anticipated to happen around 2140 when the total number of Bitcoins in circulation will near the theoretical maximum supply of 21 million.
What does Bitcoin Halving mean?
To grasp the concept of Bitcoin halving, it’s essential to understand how the Bitcoin network operates. The backbone of Bitcoin, blockchain technology, consists of a network of computers running Bitcoin software, each holding a partial or complete record of the transactions on the network.
Every full node has the responsibility to confirm or reject transactions on the Bitcoin network. This involves verifying that each transaction is valid, including ensuring it meets the correct validation criteria and does not exceed the required length.
Transactions are approved individually and only after all transactions in a block are confirmed. Once a transaction is confirmed, it is added to the blockchain and broadcast to other nodes.
The stability and security of the blockchain are enhanced by adding more computers (or nodes). As of November 1, 2023, there are approximately 16,902 nodes running the Bitcoin software.
While anyone can join the Bitcoin network as a node, provided they have sufficient storage to download the entire blockchain and transaction history, not all nodes are miners. Approximately every four years, after 210,000 blocks have been mined, the reward given to Bitcoin miners for processing transactions is halved – a process known as halving.
This reduces the rate at which new bitcoins are introduced into circulation. This reward system will persist until around 2140, when the proposed limit of 21 million coins is expected to be reached.
At that point, miners will earn income from transaction fees paid by network users. These fees will continue to incentivize miners to maintain and support the network.