Bitcoin Halving 2020: Some FAQs on What It Is and Why It Excites People
Many people in the crypto world bring up the bitcoin halving like it’s the industry’s saving grace after the several market swoons of the past months. But what does actually happen? Let Binance Academy guide you on the basics.
Before we get started if you're not sure what bitcoin is, check out Binance Academy's guide "What Is Bitcoin?"
One of the most anticipated developments in the cryptocurrency space for 2020 is bitcoin halving. This event, expected to occur in May 2020, will result in the 50% reduction of the block subsidy being given to Bitcoin miners.
At face value, bitcoin halving seems like bad news for miners. However, many people who closely follow crypto say this phenomenon is as a catalyst for major, positive price action for Bitcoin and altcoins in the future.
If you find yourself asking why that’s the case, Binance Academy has prepared this short FAQ to help you understand what’s going on.
How did Bitcoin halving begin?
When Bitcoin was created in 2008, those who participated in its decentralized network are able to earn 50 BTC for each block they validate cryptographically, in a process more commonly known as mining. Through this method, there were 10.5 million BTC generated within a span of four years.
But Bitcoin is created to have a maximum supply of 21 million BTC. If the pace of creating BTC was retained as is above, all 21 million BTC will have been created within less than a decade. To ensure that this doesn’t happen, the rate of creating BTC was set to be reduced by 50% every 210,000 blocks created. This is what happens with bitcoin mining.
What happened during the past Bitcoin halving events?
The first bitcoin halving event happened on November 28, 2012. That day, the first 210,000 blocks were created, so it triggered the code that reduced the block reward from 50 BTC to 25 BTC. This meant that for the next 210,000 blocks being created, just 5.25 million BTC will be generated.
Bitcoin halving happened again on July 9, 2016, when the block height of the Bitcoin blockchain reached 420,000 blocks. The block reward was then decreased from 25 BTC to 12.5 BTC. Between 2016 and 2020, 2.625 million BTC are expected to be created.
When will the next Bitcoin halving happen?
According to Binance Academy’s Bitcoin halving countdown, the next Bitcoin halving event is expected to occur by May 6, 2020. However, please be aware that the estimate may change from time to time. This is because Binance Academy uses sophisticated calculations and live blockchain statistics to estimate average block times and other factors that affect the timing of the next halving event.
There are several websites that offer different estimates on when the next having event for Bitcoin will happen. However, most of these websites rely on commonly-quoted average block times for Bitcoin, without the nuance that Binance Academy provides.
What can we expect for this year’s bitcoin halving?
When the block height of BTC reaches 630,000, the block reward will then decrease from 12.5 BTC to 6.25 BTC. By then, 18,375,000 BTC is already in circulation, out of the maximum 21 million. However, between 2020 and 2024 (the next expected bitcoin halving year), only 1,312,500 BTC will be created.
Why is Bitcoin halving a big deal?
At the most basic level, Bitcoin halving affects miners, whose rewards will be reduced by half. It will take roughly the same amount of effort to earn 50% less than what they received before the halving. However, there are other factors at play, such as Bitcoin’s scarcity and its underlying impact on the crypto’s value, market forces that influence Bitcoin’s price, and several other external events.
Many people in the crypto community believe that Bitcoin halving can trigger a significant upswing in Bitcoin prices. They cited previous price upswings that happened a year after halving, such as the one-year rise in BTC value from $11 to $1,100 after the first halving, or the second halving’s record of growth from $600 to $20,000 within 18 months.
However, other people have said that the Bitcoin halving event of 2020 can’t be compared to the previous halving events, due to several factors, such as increasing market maturity and better halving anticipation in the crypto community, as well as the possibility that the impact of halving is already priced into the current BTC prices.
Whatever the future holds for BTC value, people will see Bitcoin halving as an inflection point.
What’s the best way to track future developments in Bitcoin halving?
As a leading educational hub for all things crypto, Binance Academy is a one-stop-shop for everything you need to know about Bitcoin halving and other terms that relate to Bitcoin. Its comprehensive Bitcoin halving countdown gives you everything you know about Bitcoin halving, from the process to the expected date and time for the actual halving.
You can also look into this report by Binance Research for some insights on halving scenarios of Litecoin, an altcoin that spun off from Bitcoin.