A halving (or halvening) is a blockchain event when block rewards earned by miners are cut in half. The term miners can refer to either the high-powered computers that mine Bitcoin (BTC), or the owner of the computer(s). Block rewards incentivize miners to verify transactions which is necessary on the decentralized Bitcoin network.

Bitcoin mining

The most well-known example of halving is with Bitcoin since it uses the Proof-of-Work (PoW) consensus mechanism. The value of Bitcoin is that it has provable scarcity decided by Satoshi Nakamoto, which is programmed into the blockchain; there is only 21 million bitcoin available to be mined. 

When a Bitcoin transaction is requested by a user the Bitcoin miners go to work solving a complex algorithm. The first miner to solve the algorithm adds the new transaction’s data to the blockchain as a new block. Solving the algorithm is the “work” that is done to “prove” the transaction is legitimate. The miner then receives a small fee for the work, known as the coinbase. 

Block rewards

Halving is automatically programmed to occur after every 210,000 blocks that are added. By decreasing the amount of earnable rewards at specific intervals, deflation of their value is prevented and scarcity of bitcoin is maintained in tandem with the number of blocks added. Rewards will continue to diminish approximately every four years until the last Bitcoin is mined, in the year 2140. 

Bitcoin mining is now only profitable for established companies that can afford the high-powered computers (known as ASICs) which can cost as much as $30,000. These companies must maintain this specialized equipment and be able to afford the high energy costs that come with powering them. Currently, energy powered by fossil fuels costs about 4 cents per kilowatt while solar power costs about 30 cents per kilowatt. The electrical power is necessary to harvest Bitcoin.

Bitcoin halving dates 

Since being launched in 2009 Bitcoin has been halved three times: in 2012 (25 BTC rewarded), 2016 (12.5 BTC) and 2020 (6.25 BTC). Currently a miner can earn 6.25 BTC per block that is created and added to the Bitcoin blockchain. The next halving is set to occur in May 2024 when block rewards will be worth 3.125 BTC per block.

Bitcoin is not the only cryptocurrency to use halving; Litecoin (LTC), ZCash (ZEC), Dash (DASH), and Ravencoin (RVN) also halve their block rewards.