Bitcoin halving and you
You probably heard that Bitcoin has a maximum limit of 21 million BTC. This scarce limited supply is one of the things that give Bitcoin its value. But how did this limit came to be? Isn’t Bitcoin still being mined and created every day? The answer to these questions is in the event called “halving”.
Mining 101
Mining is the act of using computer power to solve a specific mathematical problem. The fact that real power is spent and never recovered is what makes Bitcoin secure. Attacks to Bitcoin must spend more power than everyone else, and the costs of this attack are irreversibly spent. As a reward to securing the network miners get some BTC on every block found. This BTC is brand new and added to the total supply of coins already in circulation.
Halving explained
Bitcoin was designed to simulate gold. When a gold mine is depleted, only the more difficult to extract gold remains left to be mined. Likewise, when a certain amount of mining is done on Bitcoin, the remaining amount gets more difficult to extract. When previously miners would receive a certain amount of BTC for finding a block, now miners receive half of that amount. The time when the miner rewards are cut in half is called the halving. The code itself that runs the Bitcoin network enforces that the halving occurs every 210.000 blocks.
Limited supply
When Bitcoin first started, each block created 50 new BTC. If that amount was fixed, the BTC supply would grow forever. But mathematics has an interesting property: when a value is added to its half, then half of that, then half of that, and so on infinitely, the sum gets closer and closer to a certain value, but never passes it. In case of Bitcoin, 50 new BTC for 210.000 blocks, then 25 BTC, then half of that, and so on will get closer and closer to the number 21 million, but never above it.
The next halving
Halvings occur every 210.000 blocks, so it’s possible to estimate when they are going to happen. The first halving happened in November of 2012. The second in July of 2016. The next halving is expected to happen in early May of 2020, decreasing the mining rewards to 6.25 BTC. We’re adding a countdown clock to the BTC wallet on our app so you don’t miss it. Events are being planned around the globe to celebrate it.
What it means to you
If you are not a miner, you may not see much difference immediately. However many speculate that this decrease of new BTC issuance will drive the price up. The past price history clearly shows an increase following halving events. Of course, past performance is not indicative of future results. And Bitcoin has a lot more going for it than just the limited supply. The technology keeps advancing at breakneck speeds. The halving is one step bringing us closer to a bright future. Let’s celebrate!
