Bitcoin is created by an anonymous cryptographer named Satoshi Nakamoto in 2009. From 2009 to now Bitcoin proved itself a successful experiment as digital money and becoming more strong with time.
It can be seen that the value of Bitcoin is increasing continuously from the beginning in the long term, it is happening because Bitcoin is designed to be more valuable with time.
So the Bitcoin Halving event is one of the important factor that makes Bitcoin more valuable with the time that usually occurred in 4 years approx.
In this article, we will cover the following topics:
- What is Bitcoin Halving?
- What happened with Bitcoin at Bitcoin halving?
- How Bitcoin Halving affects Bitcoin price?
- What happens when all Bitcoins are mined?
1 What is Bitcoin Halving?
Bitcoin Halving simply refers to reducing the rate of daily new bitcoins generated with time which decreases the inflation rate of bitcoin with time.
Bitcoin Halving is a process that reduces bitcoin mining reward per block to half of the previous value that occurred after every 210,000 blocks.
In bitcoin halving, the rate of generation of new bitcoins will be reduced by 50% in every 4 years approximately.
2 What happened With Bitcoin at Bitcoin Halving?
In the image above, you can see Bitcoin’s inflation rate during each period.
You must know about some terms shown below to understand bitcoin halving:
Block: A block is collection of bitcoin transaction or simply say data. Initially the size of a bitcoin block is 1MB but after Bitcoin cash (BCH) Hardfork the block size increased upto 2mb. Nowdays you see 1.2-1.4 MB blocks on the bitcoin blockchain.
Blockchain: It is the chain of Blocks containing all the bitcoin transaction of network. Every block is connected by its previous block by a complicated mathematical function called ‘Hash’.
Mining: It is the process of verifying newly created blocks containing bitcoin transactions to add them into the blockchain. The persons who create new blocks known as miners.
Block Reward: Every new block creation by miners generates new bitcoins that are transferred into the wallet of the creator (or miner) of that block. The number of new bitcoins created in the new block creation known as the block reward of miners.
So, after every 10 minutes (average) there is a new block mined by miners and new bitcoins are created which is also called block reward.
Bitcoin Halving is the event of a reduction in the bitcoin block reward by 50% that occurred every-time whenever new 210,000 blocks mined by miners. It leads to the lower supply for new bitcoins.
When bitcoin was started in January 2009, the block reward was the 50 bitcoins.
The First Bitcoin halving occurred on 28 November 2012 where the bitcoin block reward was reduced from 50 bitcoins to 25 bitcoin.
So after that day, the new bitcoin block reward becomes 25 bitcoins for every new block generated by miners.
In July 2016, the second bitcoin halving occurred that reduced the block reward from 25 to 12.5 bitcoins.
First halving – 210,000 blocks, Block Reward – 50 Bitcoins
Second halving – 420,000 blocks, Block Reward – 25 Bitcoins
Third halving – 630,000 blocks, Block Reward – 12.5 Bitcoins
and so on.
Bitcoin Halving Counter – https://www.bitcoinclock.com/
3 How Bitcoin Halving affects Bitcoin Price?
In the image above, the vertical green lines indicate the previous two halvings (2012-11-28 and 2016-7-9).
In reality, no one knows what will happen with the price of bitcoin after the bitcoin halving event.
But according to fundamentals, the price of bitcoin will rise in long term aspects due to a reduction in inflation on the increasing demand.
In the short term, the bitcoin rate may rise to some value or maybe remained unchanged but there are very fewer chances of fall in the price of bitcoin when the bitcoin halving occurred.
If you look at the price history of bitcoin then you will find that bitcoin price makes new All-Time High price (ATH) in the next 1-2 years from the time of bitcoin halving occurred.
In November 2012, when the first bitcoin halving occurred then the bitcoin price went from $13 to $1100 in just the next 12 months.
In July 2016, When the second bitcoin halving occurred then the bitcoin price went from $650 to $19000 in just the next 18 months.
Easy to guess what happens after third halving of bitcoin likely to happen in May 2020.
4 What Happens When All Bitcoins Are Mined?
There is only a maximum of 21 million bitcoins that can be created or mined, and after these all 21 million bitcoins will be mined then there will be no new bitcoins that will be created and we can say there will be no new bitcoins will be mined.
As we know that in every four years the rate of new bitcoins creation or mining reward decreased to its half value from its previous value. So as per the mathematical calculation, it is estimated that all bitcoin will be successfully mined or created until the year 2140.
So, what happened after 2140 when there is no new bitcoin created or mined? and what happened with miners? and how the bitcoin network will be protected?
Here is the expected answer from the developers and bitcoin experts:
These questions are discussed on the bitcointalk platform time to time as you can check the following links:
- What happens when all bitcoins are mined? ( March 21, 2012, 04:08:11 PM )
- Last Bitcoin mined. (June 22, 2014, 04:40:48 PM)
- After all bitcoins mined ( March 09, 2017, 10:46:19 AM )
- What Happens to Bitcoin After All 21 Million are Mined? ( June 08, 2017, 08:18:05 PM )
- What happens when Bitcoin reaches its Max Supply? ( October 21, 2017, 04:00:05 PM )
- What is going to happen when we reach the 21 Million BTC supply limit? ( November 05, 2017, 08:00:06 PM )
- What happened 2140 all BTC are mined ( May 02, 2018, 12:26:59 PM )
- How will Bitcoin survive after all 21M coins have been mined? ( April 06, 2019, 12:34:18 AM )
- what happened to bitcoin after mining of 21 million ( July 01, 2019, 06:28:29 PM )
The most reliable solution answered by most of the bitcoin experts is that the miners will have to rely only on the transaction fee of bitcoin instead of the newly generated bitcoins in the block reward.
Of course, there won’t be any new bitcoins that will be generated after the 21 million cap limit reached, and there won’t be any meaning of bitcoin halving after that, as the miner’s block reward will be zero (0) and only the transaction fee available on that mined block.
Hence Miners will continue to mine new blocks by getting rewards of the transaction fee and bitcoin network will always stay protected and will never be stopped anytime in the future.
For Fun – if you are reading this post in 2140 then you know everything now.
According to the designing structure of bitcoin, it seems like that the aim of the creation of bitcoin is to make it store of value, not the medium of exchange.
Like today people are buying gold in order to store their value of money and not for purchasing things by it, so there is possibility for Bitcoin to become store of value like gold where people buy it and store it for a long time in order to gain some profits by holding it, and of course no one wants to spend their bitcoins as bitcoin value is increasing with time.
There are two main reasons for bitcoin design that makes bitcoin more valuable with time.
- Bitcoin supply is fixed As Bitcoin’s maximum supply is limited to a maximum of 21 million bitcoins.
- The rate of inflation is going lower with time due to bitcoin halving occurred after every 4 years approx.
Bitcoin is not a become rich fast scheme, it’s a don’t get poor slowly scheme.