What is the Bitcoin halving or halving event?
- Every four years, on the halving day, the amount of new bitcoins created is cut in half. This means that when Bitcoin undergoes a halving, the reward given to contributors who secure the network is reduced by 50%, directly affecting the rate at which new bitcoins are introduced into circulation. This is what we refer to as the halving day or "halving."
- In early 2020, 12.5 new bitcoins were added to the network every 10 minutes through virtual "mining." In May, this amount was halved to 6.25. In April 2024, it will be halved again to approximately 3.125, and the process will continue until all 21 million coins have been mined (which, according to estimates, will happen around the year 2140). This process, encoded in the Bitcoin protocol by Satoshi Nakamoto, the creator of Bitcoin, is a way to limit the total supply of Bitcoin, thereby increasing its scarcity.
What happens when Bitcoin undergoes a halving?
- When a Bitcoin halving occurs, the number of new bitcoins produced is halved. In other words, the reward miners receive for validating transactions and adding them to the blockchain is reduced by 50%.
- This event is encoded in the Bitcoin protocol and occurs approximately every four years or every 210,000 blocks.
Why is the Bitcoin halving important?
- After a Bitcoin halving, the reward given to contributors who secure the network is reduced by 50%, directly affecting the rate at which new bitcoins are introduced into circulation. And since there are only 21 million bitcoins and the halving reduces this number, all of this contributes to Bitcoin's scarcity.
- This inherent scarcity, combined with the historical increase in demand following previous "Halving" events, fosters a sense of digital rarity that could lead to potential upward price pressure.
— I?igo Goya García, CEO de Mercuri Capital
