Bitcoin halving is a mechanism set by its founder Satoshi Nakamoto in the Bitcoin white paper. The Bitcoin code stipulates that for every 210,000 blocks mined, the Bitcoin reward for miners is reduced by half. On November 28, 2012, Bitcoin was halved for the first time, and the reward each block was reduced to 25 Bitcoin; on July 9, 2016, Bitcoin was halved for the second time, and the reward was reduced to 12.5 Bitcoin. On May 12, 2020, the third halving was completed.

What is the Bitcoin halving?

In 2008, with the collapse of Lehman Brothers, the largest financial company in the history of the United States, the global financial crisis reached a climax. Inflation was severe, and the economy was heading toward a great recession.

On November 1, 2008, during this financial turmoil, Satoshi Nakamoto published a Bitcoin white paper on a mailing list called “Cypherpunk”, which became the symbol of the initial public issue of Bitcoin and stipulated Bitcoin has a total supply limit of 21 million. Satoshi Nakamoto does not use the total amount to calculate Bitcoin but designed a set of halving algorithms to regulate the output, that is, the Bitcoin network block reward halving. Under the stipulated supply limit of 21 million, a block in ten minutes on average, the reward is halved for every 210,000 blocks.

All Bitcoins are issued through newly generated blocks. At first, 50 Bitcoins were rewarded for every block packaged. The code stipulated that after every 210,000 blocks of Bitcoins, the block reward would be reduced by half. The mining speed is 6 blocks an hour, 24 hours a day, and 210,000 blocks are halved every four years. 210,000/(6*24*365)=3.995...(approximately equal to 4 years)

The first Bitcoin halving was at the end of 2012. The 210,000th block was rewarded 50 Bitcoins, but the 210,001st block was only rewarded 25 Bitcoins. That is, every 21,000 blocks is the critical point for halving.

The second halving occurred in mid-2016, and the reward was halved again. When the 420,001st block was mined, only 12.5 Bitcoins were rewarded.

After two halvings every four years, in the third Bitcoin halving, the reward is changed from 12.5 Bitcoins to 6.25 Bitcoins per block.

By analogy, as the number of network users continues growing, the halving of mining rewards will make Bitcoin scarcer. Through a geometric series, it can be calculated that until around the year 2140, that is, after the 33rd halving, 21 million Bitcoins will be mined, and the reward will cease. (The smallest unit of Bitcoin is satoshi, 1 satoshi = 0.00000001 BTC, after the 33rd halving, the reward for new Bitcoin blocks will be less than the smallest unit of 1 satoshi.)