Halving mechanism: the core of Bitcoin inflation control

Halving is a key economic concept in the Crypto Assets field. In short, this mechanism slows down the creation of new coins by gradually dropping the Miner’s Block Reward. For Bitcoin, the halving mechanism ensures that its Token supply always rises according to a predetermined schedule until it reaches the hard cap of 21 million BTC.

The Working Principle of Bitcoin Halving

The Bitcoin system has a built-in automated halving process. Every time the network adds 210,000 blocks (which usually takes about 4 years), the individual block reward that miners receive automatically drops by 50%. This clever design ensures that Bitcoin does not experience unlimited inflation, thereby maintaining the scarcity of this digital asset.

Throughout the entire lifecycle of Bitcoin, Halving events occur repeatedly, gradually dropping the incentive levels for Miners. Ultimately, when all 21 million Bitcoins have been mined, Miners will no longer receive Block Rewards and will rely on transaction fees to maintain network security.

Why Bitcoin Halving is So Crucial

The Halving mechanism forms the core pillar of Bitcoin's token economics. By precisely controlling the release schedule of Bitcoin, this mechanism ensures the predictability of supply, thereby maintaining the value proposition of BTC. With a fixed supply cap of 21 million, the Halving mechanism gradually drives the market closer to this target, which is a significant advantage of Bitcoin over fiat currency.

Market participants have paid close attention to the Halving mechanism. From traders to long-term holders, and on-chain analysts, many are closely tracking this event as it often triggers significant price volatility and changes in sentiment in the Crypto Assets market.

Bitcoin Halving History

Since the first Halving in 2012, Bitcoin has experienced multiple cycles:

• First Halving in 2012: Block Reward dropped from 50 BTC to 25 BTC
• Second Halving in 2016: rewards further drop to 12.5 BTC
• Third Halving in 2020: Rewards continue to drop to 6.25 BTC
• Fourth Halving in 2024: Expected to occur in April, at which point the rewards will drop to 3.125 BTC

According to the current progress, over 90% of the Bitcoin supply has already been mined globally. According to the current halving schedule, the last Bitcoin is expected to be mined around the year 2140.

The Impact of Halving on Holders

For investors who already hold Bitcoin, the Halving event itself will not directly change their balance. Your BTC amount will not decrease due to the Halving.

However, this does not mean that the Halving has no impact on your portfolio. Indirectly, the Halving may drive changes in Bitcoin prices, thereby affecting the market value of your holdings. Moreover, the Halving often signals a shift in market sentiment, adjustments in mining difficulty, and changes in network dynamics. For this reason, professional traders, venture capitalists, and participants in the Crypto Assets ecosystem closely monitor Halving events.

What is the next step?

According to the established schedule, the next Bitcoin Halving will occur around April 2024 (when the block height reaches 840,000). After this Halving, Bitcoin will experience several subsequent Halving events. However, ultimately, after the 32nd Halving is completed, miners will no longer receive any new Bitcoin rewards—the maximum supply of 21 million BTC will be fully locked.

This design ensures Bitcoin's unique status as a scarce digital asset and explains why many view it as “digital gold”.