Every four years, the amount of Bitcoin rewarded to miners is halved, an event is known as the Bitcoin halving. So what is Bitcoin Halving and how Bitcoin supply is controlled? In this article, we will discuss one of the most pivotal events on the Bitcoin blockchain is the halving, the halving of the new Bitcoin supply.
Before we are heading to How Bitcoin Supply is controlled, you should know what is Bitcoin Halving.
What is Bitcoin Halving?
Bitcoin halving refers to an event in which the rate at which new units of the world's largest cryptocurrency enter circulation is halved. After every 210,000 blocks are mined, or roughly every four years, the block reward given to Bitcoin miners for processing transactions is cut in half. This event is called the halving because it halved the rate at which new bitcoins are released into circulation. This is how Bitcoin implements comprehensive price inflation before all Bitcoins are released.
In 2009, the reward for each block in the mined chain was 50 bitcoins. After the first halving, it was 25, then 12.5, and then on May 11, 2020, it became 6.25 bitcoins per block. To put it another way, imagine if the amount of gold mined from the earth halved every four years. If gold's value is based on its scarcity, a "halving" of gold production could theoretically push up its price every four years.
How Bitcoin Supply is limited?
People know that the supply of bitcoin is limited, Satoshi Nakamoto, the inventor of Bitcoin, believed that scarcity could create unprecedented value. After all, there's only one Mona Lisa, and only so many Picassos, and there's a limited supply of gold on Earth.
The idea of limiting the supply of Bitcoin is very different from how fiat currencies like the US dollar work. Fiat currency was originally created according to strict rules to create a dollar, the US government needed to reserve a certain amount of gold. This is called the gold standard.
According to Satoshi Nakamoto, this devaluation of fiat currency could have catastrophic effects, so that no party can create more bitcoins through the code.
Summary
Hopefully, you will now understand how Bitcoin supply is limited and what is Bitcoin Halving. The Bitcoin halving is a much-hyped event that happens roughly every four years, with the first happening in 2012. It is part of the underlying programming of the virtual currency to keep its total supply constant.
