TL;DR: Bitcoin halving is when the bitcoin mining reward per block is cut in half. This occurs every 210,000 blocks mined or about every 4 years. There have been three halvings so far in 2012, 2016, and 2020. The next halving is projected for 2024. Let's dive deeper into the history.
A key component of Bitcoin's programmed scarcity is the halving - an event occurring roughly every 4 years where the mining reward is reduced by 50%. Halvings are scheduled to continue approximately every 210,000 blocks until the total fixed supply of 21 million bitcoin is reached.
Understanding the dates and effects of previous halvings can provide perspective on what to potentially expect for future halvings. Here is an overview of Bitcoin's halving history so far:
The First Halving - November 28, 2012
The first halving took place on November 28, 2012 when the block reward dropped from 50 bitcoin per block to 25 bitcoin. At bitcoin's inception, miners received 50 bitcoin for each block mined. This was reduced to 25 bitcoin once the 210,000th block was hit.
Some key notes regarding the first halving event:
- The halving occurred about 4 years after Bitcoin's launch in January 2009. This confirmed the designed 210,000 block length between halvings.
- Bitcoin's price at the time was approximately $12. Prior to the halving, some expected the price would rise proportionally with the reduced supply flow.
- In the months following, bitcoin entered a significant bull market as price reached highs over $1,000 by December 2013. However, it is debatable whether the halving was a direct cause.
- Bitcoin mining difficulty adjusted to become easier after each halving to maintain the ~10 minute block intervals.
- The network hash rate was approximately 25 TH/s before decreasing temporarily following the halving.
The Second Halving - July 9, 2016
The second halving took place on July 9, 2016 when the reward per block fell from 25 bitcoin to 12.5 bitcoin. Again, this halving was triggered once 210,000 blocks had been mined since the first halving in 2012.
Key details regarding Bitcoin's second halving:
- Bitcoin's price at the time was around $650. The market remained relatively calm after the halving event itself.
- However, excitement began building in the following months as Bitcoin rose to a high of nearly $20,000 by December 2017. The "halving hype" cycle appears to have kicked in with some delay.
- Mining hash rate and difficulty both continued increasing despite the halved rewards due to evolution in mining technology and profitability.
- By the second halving, mining had become more dominated by large pooled mining companies rather than individual miners with CPUs or GPUs.
The Third Halving - May 11, 2020
The third halving occurred on May 11, 2020 reducing the block reward from 12.5 bitcoin per block to 6.25 bitcoin.
Here are key details from Bitcoin's recent 2020 halving event:
- Bitcoin's price was approximately $8,600 at the time of the halving. The hype cycle and price rise took longer to initiate, likely due to the COVID pandemic.
- By December 2021, Bitcoin's price reached a new all-time high around $69,000 partially stimulated by the halving reducing new supply issuance.
- Mining hash rate and difficulty continued setting new all-time highs as mining professionalized at scale with more efficient ASIC chips.
- By the third halving, China had come to dominate a majority of Bitcoin's hash rate. This concentration subsequently reduced following mining bans within China.
- Many miners upgraded equipment ahead of the halving to prepare for the upcoming reduction in block rewards.
When is the Next Bitcoin Halving?
Bitcoin's next halving is expected to occur in early 2024 based on projections of block production. The block reward will reduce from 6.25 bitcoin to 3.125 bitcoin per block.
Some key predictions surrounding the upcoming halving include:
- Bitcoin's price may rise in anticipation of reduced issuance and halving hype, but the magnitude of any rally likely depends on overall market conditions.
- Mining profitability will be squeezed, forcing less efficient miners to shut down unless bitcoin's valuation rises proportionally. This could lead to some temporary mining hash rate and difficulty declines.
- Energy efficiency and mining gear optimization will become even more critical priorities for mining company profitability.
- The bitcoin community may debate potential changes to guard against over-consolidation of mining power as profits diminish.
While the exact effects are unknown, if history repeats, the next halving will spur further growth and maturation for Bitcoin as an asset and network. The programmed supply scarcity model continues functioning as originally designed.