Bitcoin has just completed its fourth halving, the monetary policy procedure set in the code that halves newly minted Bitcoins every approximately four years. From now on, miners, companies and individuals who care about solving the mathematical calculations behind the safety of Bitcoin's operation will receive half the rewards compared to the previous era.
For each single block, we go from 6.25 newly produced Bitcoins to 3.125, through a procedure that is fixed in the Bitcoin code and which will lead to a maximum of 21 million Bitcoins.
«It is a procedure written in the code and foreseen by the creator, Satoshi Nakamoto – explains Gianluca Grossi of Criptocurrency.it – it is the basis of Bitcoin's monetary policy, which is not decided by the central banks, but by what is written in the code. It is no longer an experiment: 15 years after its creation, Bitcoin continues to function fundamentally just as it was expected to work, without external interventions and without anyone deciding for others.” Bitcoin is a coin with decreasing inflation: every 210,000 blocks – which is equivalent to approximately four years – the issuance of new Bitcoins is halved. New Bitcoins are issued with each block and awarded to whoever has completed the mathematical task of solving a new block. «It is an automatic mechanism that is based on consensus – adds Grossi – and which has demonstrated to date that it is possible to have a monetary system without centralized decision centers. The halving concerns both the monetary issue and the more strictly philosophical one of Bitcoin.”
Today this procedure, which is called mining in jargon, involves several large, medium and small-sized companies, which depend for their revenues on the issuance of new Bitcoins. Historically, Bitcoin has never reached a halving with a price lower than that of the previous halving, a statistical curiosity that also fuels investor expectations.
What is bitcoin halving?
The Bitcoin halving is an event that reduces the reward for mining this cryptocurrency in half. This process occurs approximately every four years, or more precisely, every 210,000 blocks mined. Halving is an integral part of the Bitcoin protocol, introduced to maintain control over the total supply of Bitcoin, which is limited to 21 million units.
The reason behind halving is to emulate the progressive scarcity of resources such as gold. As more gold is mined (or, in the case of Bitcoin, more blocks mined), it becomes progressively more difficult and expensive to obtain more. This mechanism aims to prevent inflation by ensuring that the rate of new Bitcoins entering circulation decreases over time.
The immediate effect of the halving on mining is that it makes it harder for miners to earn rewards, as the amount of Bitcoin they receive for each confirmed block is cut in half. However, historically, halvings have been followed by significant increases in the price of Bitcoin, although this is not guaranteed and may depend on a variety of market factors.
Until now, there have been several halving events: the first in November 2012, the second in July 2016, and the third in May 2020. The impact of these events on the market and value of Bitcoin has been the subject of much debate and speculation within the cryptocurrency community.