Halving
A halving is a planned 50% reduction in the number of new coins awarded to miners. It doesn’t cut the amount of crypto you own in half.
What is a halving?
With Bitcoin, miners receive new bitcoin as a block subsidy. Miners use computing power to create new blocks containing transactions. A halving cuts this block subsidy in half.
With Bitcoin, this happens after every 210,000 blocks, on average about once every four years. The exact date isn’t fixed because it depends on how quickly new blocks are found.
A halving only applies to newly issued bitcoin. Bitcoin that already exists remains unchanged. Transaction fees are a separate part of miners’ rewards.
An example of a halving
During the 2024 Bitcoin halving, the block subsidy fell from 6.25 to 3.125 bitcoin per block. Miners could still receive transaction fees as well.
If you had 1 bitcoin before the halving, you still had 1 bitcoin afterward. Only the amount of new bitcoin issued per block went down.
Why is a halving important in crypto?
A halving matters because it reduces the amount of new Bitcoin entering circulation. With each halving, the reward miners receive in new Bitcoin is cut in half. As a result, the supply of new Bitcoin grows more slowly, while demand may stay the same or increase. That’s why Bitcoin halvings get a lot of attention in crypto news.
A halving also affects miners. After one, they receive less new Bitcoin per block, which can reduce their income. Whether mining remains profitable depends on factors including the price of Bitcoin, transaction fees, energy costs, and competition among miners.
Historically, Bitcoin halvings have often been followed by sharp price increases. However, this doesn’t mean the price automatically rises after every halving. The timing of a halving is known in advance, and the price still depends on various factors, including supply and demand and overall market sentiment. Also, not every cryptocurrency has a halving.
