One of the most important features of Bitcoin is to set a limit for the amount of bitcoins that will be in circulation. The creation of new bitcoins is predictable and transparent for everyone. An important term concerning limited supply in the Bitcoin world is block halving. So what is halving and why is it important? We will explain in detail later in our article.
To explain what it means to halve a bitcoin block, it is necessary to first talk about how new bitcoins are created. The production of bitcoin is limited and a total of 21 million bitcoins will be produced. The amount of bitcoin in circulation is predetermined by the bitcoin protocol. All bitcoins are released at a predictable pace via block rewards. The block reward is an amount of bitcoin that miners earn in exchange for their work. Miners essentially protect and secure the bitcoin network by adding new transaction-filled blocks to the blockchain where the existing blocks are located. This is a very important job and miners are rewarded for it.
Currently, the reward per block produced is 6.25 bitcoins. The block reward halves approximately every four years, which is called halving. Bitcoin halving is a very important event for investors because the number of new bitcoins generated by the network decreases. This limits the supply of new bitcoins, so prices could rise if demand remains strong.