In the crypto world, the term halving refers to a mechanism that reduces the rate of issuance of new coins by half. This reduction takes place periodically, every 4 years, and ensures that a cryptocurrency will continue a constant rate of issuance until it reaches the maximum supply originally planned.
With Bitcoin, new coins are created on a regular basis as part of the block reward. In other words, every time a miner manages to validate a new block, he earns newly generated coins as a reward for his work.
It is therefore via the mining mechanism that new bitcoins are created and enter the system. This process takes place approximately every 10 minutes at a decreasing and controlled rate. As a result, the halving guarantees that the block grant will be divided in 2 every 210,000 blocks, or approximately every 4 years.
Halving is the foundation of the business models of some cryptocurrencies like bitcoin. This mechanism ensures that coins will be issued at a constant rate and according to a pre-decided and thus predictable decay rate. This means that the inflation rate backed by certain crypto assets is controlled. Here is the main difference with currencies issued by traditional central banks, whose supply is infinite.
Bitcoin's initial block subsidy, called the genesis block, was set at 50 BTC. This means that the rewards to miners were originally 50 BTC per block. This subsidy was later reduced to 25 BTC in 2012, then to 12.5 BTC in 2016 and finally, to 6.25 BTC in May 2020.
The next Bitcoin halving is expected to take place in June 2024. This event will reduce the reward per block from 6.25 BTC to 3.125 BTC, which in turn will reduce the rate at which new bitcoins are generated and brought to market.
The total supply of bitcoins to be generated is limited to 21 million coins. The reward per block will continue to be halved every 210,000 blocks until the maximum supply is reached.
The last Bitcoin halving is expected to occur in 2140. The exact date of the last Bitcoin halving may vary depending on a number of factors, such as the rate at which new blocks are mined and the overall health of the network.
In addition, it is not impossible that the Bitcoin network will be changed or updated in the future, which could potentially affect the timing and nature of future halvings.
Once 32 halvings have taken place, the mechanism will end and no more bitcoin will be created. At that point, the maximum supply of 21 million BTC will be reached.
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