Thread by @JohnCantrell97

While we all now know what a Bitcoin price halving is 😂, I’m sure you’ve heard about Bitcoin’s other less brutal halving.

What is being cut in half?
How often does it happen?
Why should I care?

I’ve been working with Bitcoin for almost a decade, let me break it down for you 👇

When you hear the word halving you probably wonder what exactly is being cut in half.

Is it the price?
The number of coins?
The number of coins I own?
The mining hash rate?

Luckily it’s none of those things. It’s referring to the rate at which new Bitcoins are produced.

A block is mined roughly every 10 minutes.

Each block that is mined produces a certain amount of Bitcoin.

The amount of Bitcoin per block started at 50 when Bitcoin was first released and it is that amount which halves roughly every 4 years.

What was once 50, is now 6.25

Why did I say “roughly” every 4 years?

How often does the amount of Bitcoin produced in each block actually halve?

It actually halves every 210,000 blocks that are mined.

The time it takes to mine a block is variable and therefore so is the time between halvings.

Bitcoin targets an average of 10 minutes between blocks. I‘ll go into what targets means in a future thread as it’s another important concept to understand.

However, if the halving happens every 210,000 blocks * 10 mins per block => ~35,000 hours => ~1458 days => ~4 years.

The actual amount of time will be less if more hash power is continually added to the network and the amount of time could be more if hash power is continually removed from the network.

There’s no exact time but there are websites out there that can give you a rough estimate.

So that’s what it is and how often it happens but why should you care?

Well if you are a miner you should really care because your revenue gets cut in half when it happens.

If you aren’t a miner it is important to understand because it’s the backbone of Bitcoin’s fixed supply.

The halving is actually what gives Bitcoin a fixed supply.

If the amount of Bitcoin that was produced every block never reduced then Bitcoin would have an infinite supply as more would be created until the end of time.

The amount produced halves until 2140 when it reaches 0.

If you do out the math (210K * 50 + 210K * 25 + 210K * 12.5 + … + 210K * 0.00000001) this is where the sacred 21 million Bitcoin number comes from.

I like to look at Bitcoin as more than an investment but the halving might also be important for the price.

The price of Bitcoin is determined in a market based on the aggregate supply and demand.

With supply held constant if the demand for a good increases then the price should go up and if the demand decreases the price should go down.

Similarly, if demand is held constant and the supply increases then the price should go down and if supply decreases then the price should go up.

Most miners are businesses who are looking to turn a profit. They have high equipment and operating costs that need to be paid off.

While some miners might hodl the coins they mine, some miners will sell them to pay their expenses and/or invest it in new mining equipment to expand their operations.

The coins the miners sell are part of the supply side of the market for Bitcoin.

When a halving occurs the miners who are selling their coin and providing that additional supply to the market it means that the amount of coin and thus supply they can provide will be cut in half.

With demand being constant the reduced supply means the price should increase.

Of course there are a million other factors in a global market like Bitcoin.

It’s also impossible to know how miners will behave or what percentage of the supply they even make up.

This is not financial advice, just some commonly held beliefs about the price during halvings.

I hope this helped you understand what the halving is, when it happens, and why you should care.

Understanding Bitcoin is so important for the world, please share my threads with as many people as possible and follow me for more educational Bitcoin content.