Definition:
Halving is the process of reducing the rewards issued for mining a cryptocurrency by half. Halving is done after a specified time period (in the case of Bitcoin, approximately every four years or so) and makes mining less profitable. Halving is done in an attempt to control the amount of cryptocurrency in circulation; thus preventing oversupply and devaluation of the currency.
Explanation:
In the early stages of Bitcoin mining, the rewards issued for mining blocks (processing transactions) was 50BTC every 10 minutes. Satoshi Nakamoto, the creator of Bitcoin, implemented code that would reduce this reward by half every 210,000 blocks (approximately every four years). Thus the reward was decreased to 25BTC per block.
Halving is essential as it extends the life of the reward system. If the reward remained at 50BTC per block every 10 minutes, then the maximum supply of coins (21 million) would be reached quickly, ceasing rewards in approximately eight years. Additionally, halving makes Bitcoin more difficult to obtain, limiting supply and ensuring a steady price increase over time.
← Back to Dictionary
