What to Expect When the Bitcoin Halving Happens
It’s an event that brings equal parts predictability and uncertainty.
For close to a year, bitcoin miners and investors have been preparing for a network change nicknamed ‘the halving‘. At approximately 18:00 UTC tomorrow, the subsidy the bitcoin network uses to compensate miners will drop from 25 BTC to 12.5 BTC, never to increase again.
Yet, despite its scheduled arrival, many in the industry remain unsure just how significant an impact it could have on bitcoin’s still-volatile price and the health of the distributed payment network’s transaction validators (aka miners).
A programmed feature in the code, the bitcoin subsidy controls the supply of new bitcoins that are released into the market with each new block. When bitcoin first launched, a miner could earn 50 BTC for sealing a block on the blockchain ledger. After 210,000 blocks, or approximately four years, however, the reward was cut in half to 25. And tomorrow, as block 420,000 is sealed, miners will be left with a reward of 12.5 bitcoin.
As currently set, only 21m BTC will ever be mined, a figure that would require the consensus of all or most bitcoin users to change.
Because the figure does not vary or become irregular, there is a steady, predictable supply of new bitcoins. To traders, this has quelled some uncertainty regarding how many new bitcoins could suddenly appear for sale, and to miners, it has provided a steady incentive for them to continue maintaining bitcoin’s ledger.
This post was published at Coin Desk on July 8, 2016.