Initially, in 2009 when Bitcoin was born, a mine block reward of 50BTC was distributed, that is, every 10 minutes 50BTC were generated out of nowhere assigned to the winning miner. According to the Bitcoin protocol, every approximately four years the reward will drop by half.
On November 29, 2012, in the block 210,000 there was the first halving which made the reward go from 50 BTC to 25 BTC.
The next halving occurred on July 10, 2016 in the block 420,000 decreasing the reward to 12.5 BTC.
The process will end with a total of approximately 21 million bitcoins by the year 2140, considering that the block reward will be halved every 4 years.
These rules were put into operation by Satoshi Nakamoto.
The price is expected to be positively affected for several reasons:
- Historically after each halving the price has always increased dramatically.
- Miners have less BTC to sell which creates a shortage. If demand remains constant the price should go up.
- With the imminent economic crisis and the great inflation expected for the following years, the demand for valuable refuge goods such as BTC or gold should increase.
Even if there are people who decide to take refuge in gold, which has constant but small inflation and is difficult to control due to the difficulty of mining it has, and it certainly seems like a better idea than keeping the money in euros or dollars, we must remember how NASA announced that a gold-laden asteroid is on the way to intervene. Since gold is a physical material, at any time you could find large gold deposits or significant mining improvements, or any other event that could generate a lot of gold and bring down its price.
Bitcoin, on the other hand, is something irreplaceable, it cannot be found more, nor can it be multiplied as the central governments consider appropriate. For the first time in history, it is the first universal and permanently scarce good. Your inflation will end up being nil, added to the large number of BTCs that are lost each year due to loss of passwords or deaths without inheritance.
Where in the Bitcoin code does the halving occur?
This is the code that defines the halves in Bitcoin. One of the things to note is that after 64 halves the block reward will go to zero.
Each halves occurs every 210,000 blocks, given that one block is mined every approximately 10 minutes, we can expect one halves every four years. The average time of ten minutes really depends on how long it takes miners to find the Proof of Work solution for each block. As miners are added this time should decrease but the mining difficulty is readjusted every two weeks, which will bring the average time back to 10 minutes.
How will miners be funded when the block reward is too small?
Mainly, miners will be funded solely by transfer fees, just as they already partially do right now. The market will adjust the values of these commissions, especially considering the low costs of creating a Bitcoin node.