What Is a Halving?
A halving, also known as a halvening, is a deflationary event that occurs in a blockchain system, resulting in a reduction of block subsidies or rewards for validating transactions.
During a halving, the rewards received for mining or validating blocks are cut in half.
This event is significant because it decreases the rate at which new supply enters circulation, thereby increasing the scarcity of coins or tokens.
Halvings in Bitcoin
Halvings are programmed directly into the blockchain’s code and their timing is known in advance.
For example, in Bitcoin, the rewards decrease approximately every four years.
The block rewards in Bitcoin are 6.25 BTC per block (900 BTCs daily), down from 12.5 BTC (1800 BTCs) since the second quarter of 2020.
This reward reduction will continue to occur every four years until the last Bitcoin is mined, which is estimated to happen around 2140.
Halvings and Predictability
Halvings bring the advantage of making the emission schedule more predictable, allowing for a better estimation of circulating supply over time.
This predictability can contribute to determining the valuation of tokens with greater accuracy.
Most cryptocurrencies that are not pre-mined incorporate a design feature where staking or mining rewards decrease over time.
New projects often aim to introduce only the minimum viable supply required at launch to increase its initial value.
Catalysts for Price Surges
Bitcoin has experienced three halvings so far, with the previous ones occurring in 2016 and 2012.
Each halving was followed by a significant increase in Bitcoin’s price due to the increased scarcity and reduced supply from miners.
Other notable cryptocurrencies that have undergone halvings include Bitcoin Cash and Litecoin.
For more information, see our in-depth guide on Bitcoin Halving, when it will accrue, and what will happen.