What Is 'The Halvening'?

The Halvening (sometimes referred to as “the halving”) is the moment when Bitcoin’s block subsidy gets cut in half. The halving of Bitcoin’s block subsidy occurs every 210,000 blocks (roughly every 4 years) and is a key feature of Bitcoin. It is because of the halving of the block subsidy that Bitcoin ultimately will have a capped supply of 21 million bitcoin.

Further Reading: What Gives Bitcoin Value?

The Halvening will continue to occur every 210,000 blocks until the block subsidy reaches 1 satoshi, the smallest unit of bitcoin at 0.00000001 BTC. As Bitcoin’s codebase parameters currently state, at that point, the next block subsidy will simply drop to zero, and miners will only collect transaction fees.

Further Reading: What Is Bitcoin Mining?

What Is the Bitcoin Block Subsidy?

If a miner successfully solves a block on Bitcoin’s blockchain, it will generate for itself a predetermined amount of bitcoin as a reward for confirming new transactions in an honest manner. This amount of bitcoin is called a “block reward” and the amount is determined by taking the original block subsidy, 50 BTC, plus fees. The subsidy cuts in half every 210,000 blocks until you get to the block you just mined. So blocks 1 through 210,000 had a subsidy of 50 BTC, blocks 210,001 through 420,000 had a subsidy of 25 BTC, blocks 420,001 through 630,000 have a subsidy of 12.5 BTC and so on.

Importantly, miners do not solely earn block subsidy for mining a block. They also collect any fees which users may attach to their transactions in order to incentivize miners to include them in the nearest block. These transaction fees are on top of the block subsidy; therefore, oftentimes a miner will receive more bitcoin for mining a block than just the block subsidy.

Have There Been Bitcoin Halvings Before?

Yes. As of the end of 2019, there have been two halvings:

• On November 28, 2012, Bitcoin’s block subsidy dropped from 50 BTC per block to 25 BTC per block.
• On July 9, 2016, Bitcoin’s block subsidy dropped from 25 BTC per block to 12.5 BTC per block.

Why Is the Halvening Important?

It Creates Predictable Scarcity

One of Bitcoin’s key features is that it is hard capped at 21 million bitcoin. This results in true, predictable scarcity. There will never be 21,000,000.00000001 bitcoin without a consensus change to the rules (in fact, there will never even be 21 million bitcoin either, as the actual number of bitcoin that will be released based on Bitcoin’s supply formula is 20,999,999.9796). The mechanism by which this hard cap is created is the block subsidy halving. Therefore, these halving events are crucial to the predictable scarcity of bitcoin.

There Are Potential Price Repercussions

Interestingly, both previous halvings preceded a meteoric rise in bitcoin’s price. While there are many outstanding theories regarding how bitcoin’s price can be modeled, almost all of them key in on the total supply of bitcoin. Since each halving reduces the supply of new bitcoin released into the market by half, these events are usually extremely consequential to bitcoin’s price.