The ‘Bitcoin halving’ is coming again. This is the time when the number of newly created bitcoins will be halved. The so-called block reward will be halved from 12.5 bitcoins to 6.25 bitcoins.

A limited amount of bitcoins is one of the core values of the bitcoin protocol. There will never be more than 21 million bitcoins in circulation. But how do you ensure a gradual distribution of bitcoins, without stopping the creation of new coins from one day to the next?

The halving

Satoshi Nakamoto came up with a gradual reduction of the block reward; the halving . The first years in which miners kept the bitcoin network safe, they received 50 bitcoins per block found. If this amount remained the same, all bitcoins would be in circulation within 8 years (21 million bitcoins, 50 bitcoins per block every 10 minutes). These 8 years, as we now know, is just a short time to build this new revolutionary network into something big. It was therefore desirable to spread this block reward over the future, so that the miners will be rewarded for their work for longer. This gives the network more time to develop a solid user base that could supplement or even replace the block reward through fees.

This smearing is done on the basis of the ‘halving’. Every 210,000 blocks, which equates to about 4 years in non-bitcoin time, the block reward halves. Where it started in 2009 with 50 bitcoins per block, this changed to 25 bitcoins per block in 2012. We are currently in the third halving, which took place in 2016. Miners currently receive 12.5 bitcoins for each block. The next halving will take place at block 630,000, about a year from now.

The total end number of Bitcoin will be reached around 2140. However, the majority of bitcoins will already be mined in the coming years. After all, around 2040 the miners will receive less than 0.1 bitcoin per block. At the moment, about 85% of all bitcoins are already in circulation. Since more and more bitcoins have been forgiven, and the block reward is falling, this also affects inflation. Because it will be at such a low level in the coming years, it is virtually negligible.

May 2020?

Because the halving uses the number of blocks found, it is not possible to predict exactly when the next halving will take place. On average, blocks are found every 10 minutes, which brings you to the estimated 4 years per halving. However, the height of the hashrate has an influence on this. If the hashrate continues to rise sharply during the 4 years, blocks will be found faster. The difficulty is only adjusted once every two weeks. This difficulty ensures that the difficulty level is so high that, with the hashrate of that moment, the blocks will be found on average once every ten minutes. This is of course also the case the other way around. When the hashrate decreases, fewer blocks will be found. As a result, the halving could take place again later in the future.

The influence of the hashrate is present, but not significant. It is unlikely that the Bitcoin Halving will not take place around May 2020; the moment when the block reward will go from 12.5 to 6.25 bitcoins.