Halving
Initially, when Bitcoin was created, its code was designed so that the mining of each block would occur approximately every 10 minutes. This rate was chosen to balance network security and transaction efficiency. At the launch of Bitcoin in 2009, the reward for miners to add a new block to the blockchain was 50 Bitcoins.
To ensure a gradual and limited supply of Bitcoins, the Bitcoin code introduced the concept of “halving”, which means periodically reducing miner rewards. This occurs every 210,000 mined blocks, about every four years. In 2012, the first halving took place, cutting miner rewards from 50 Bitcoins to 25 Bitcoins per mined block.
This process was repeated twice more, in 2016 and 2020, leading to the reward being reduced to 12.5 Bitcoins and then to 6.25 Bitcoins per mined block. This halving strategy was designed to gradually decrease the rate of new Bitcoin creation, contributing to planned scarcity and theoretically increasing the perceived value of the currency over time.
The reduced supply entering the market can lead to a supply shock weeks after the halving event:
