Bitcoin Halving: What is it and how does it work? We explain it

In May 2020, it was that time again: a Bitcoin Halving took place. Our guide explains what the term means, what its purpose is, and how it affects the course of the leading cryptocurrency.

Every year, bitcoin halving slows down mining.

Halving means halving, however, this does not affect the amount of bitcoins in existence or their price, but the reward for generating them.

What is bitcoin halving?

Bitcoins are eventually generated by mining. This is done step by step in the form of blocks.

• For each block generated, there is a fixed amount of bitcoins that are distributed as a reward.
• In bitcoin halving, this amount is permanently halved. Halvings take place at fixed intervals, namely every 210,000 blocks.
• Between the halvings pass about four years each.
• Since the total number of Bitcoins is limited to 21 million pieces, there will be a total of 32 halvings. The last such event will take place around the year 2130 or later.

In the most recent halving, which took place in May 2020, the reward was halved from 12.5 to 6.25 BTC. Consequently, after the next halving in about four years, the reward will be reduced to 3.125 BTC. As a result of the halving, the speed of the newly generated blocks decreases steadily, so that it takes all the longer until the maximum of 21 million is reached.Interesting for traders is the effect on the market: if at the same time the demand remains constant or even increases, a halving can lead to rising prices, since the supply is tightened.