The “halvening” is coming: in mid-May 2020, the supply of Bitcoins issued as mining rewards will be cut in half, again. Will the halvening cause a boom in the price of Bitcoin? Based on the last time it happened, it’s not completely out of the question. Here’s everything you need to know.
When Bitcoin block 630,001 is reached—predicted to take place on May 14, 2020—the mining reward will drop from 12.5 BTC to 6.25 BTC per block. This would be the third halving event for Bitcoin; it happens approximately every four years, or 210,000 blocks. The first halving in 2012 reduced the block rewards from 50 to 25 BTC—in 2016, it halved again from 25 to 12.5 BTC.
This hardcoded consensus rule on the Bitcoin blockchain will continue to cut the block reward subsidy in half every four years, until the year 2140—when the last of the 21 million Bitcoins will be mined into circulation. The upshot is that over time, fewer Bitcoins will be created each day, lowering the rate of overall inflation on the network.
Bitcoin’s token issuance is meant to mimic the supply and inflation curve of other scarce assets, like gold. But unlike gold, Bitcoin’s scarcity is governed by a globally distributed network of nodes (computers that keep and validate a copy of the blockchain) and miners that commit resources to process transactions on the network.
As well as acting as a mechanism to issue new Bitcoins into open circulation, the mining block reward provides an economic incentive to miners who are committing hash rate—via specialized computing hardware and electricity. Every time a halving happens, the incentive given to miners to find new blocks gets slashed in half. Today, around 1,800 new Bitcoins are minted each day (worth around $11 million) but after the next halving this will drop down to just 900 BTC a day.
Over Bitcoin’s first two halving cycles we have seen some wild fluctuations in both Bitcoin’s price and the network’s respective mining hash rate. Can prior halvening events offer any clues to what may happen in 2020