What is the Bitcoin halving? A “block” is a file containing 1 MB of Bitcoin (BTC) transaction records on the Bitcoin (BTC ) blockchain.
The ” miners ” compete to add the following block by solving a complex math problem. They do this using specialized hardware, which produces a 64-character random output known as a “hash.”
When they finish the process, they protect the block so it cannot be changed. By completing these blocks, miners receive Bitcoin.
Bitcoin halving timeline
So how does the Bitcoin halving cycle work? Miners were paid 50 BTC per block when the cryptocurrency was initially established.
Early adopters might be tempted to mine the network this way, even before its apparent success.
The rate at which a new Bitcoin is created halves every 210,000 blocks mined or roughly every four years until all 21 million Bitcoins have been mined.
According to Bitcoin’s halving date history, the last three halvings occurred in 2012, 2016, and 2020. The first Bitcoin halving or split occurred in 2012 when the reward for mining a block was reduced from 50 to 25 BTC.
The halving event in 2016 reduced the incentives to 12.5 BTC for each block mined, and as of May 11, 2020, each new block mined only generates 6.25 new BTC.
In 2024, the next Bitcoin halving is expected to take place. This system will continue until about 2140.
Why is the Bitcoin halving happening?
The Bitcoin mining algorithm is programmed to search for new blocks every ten minutes. The time it takes to find blocks will decrease as more miners join the network and add more hashing power. To restore a 10-minute goal, the mining difficulty resets once every two weeks or so.
The average time to place a block has been below 10 minutes ( approximately 9.5 minutes ) as the Bitcoin network has grown dramatically over the last decade.
The supply of Bitcoin is limited to 21 million units. The generation of new BTC will stop once the total number reaches 21 million. Bitcoin halving ensures that the amount of Bitcoin that can be mined from each block decreases over time, making BTC more rare and valuable.
Logically, the incentive to mine Bitcoin would decrease as each halving was completed. On the other hand, Bitcoin halvings are tied to massive increases in the price of BTC, giving miners an incentive to mine more even though their payouts have been cut in half.
Bitcoin miners are encouraged to continue mining as prices rise. On the other hand, miners may lose the incentive to create more Bitcoin if the price of the digital currency does not increase and block rewards decrease.
This is because Bitcoin mining is expensive and time-consuming with a lot of electricity.