Kaiko Counts Down to Bitcoin ‘Halving Day’

What is Block Reward Halving and why does it matter?

On 18 July 2016, something will happen to the bitcoin network that has only happened once before in history: Mining block rewards will be cut in half, from 25 BTC to 12.5. Kaiko is counting down to that time with our new halving clock.

What’s that, and why?

The bitcoin network was designed to produce, or ‘mine’, a steady stream of new coins around every ten minutes — from its beginnings in January 2009 to some time in the year 2140. Mining operations around the world help secure the network and keep it functioning, and for this task they are rewarded with the new bitcoins.

See Kaiko’s full guide to bitcoin mining and block reward system here.

But there’s a twist. At every 210,000th block (which takes just under 4 years each time) the number of bitcoins in that reward halves. Originally 50 BTC every ten minutes, it became 25 BTC on 28 November 2012.

The speculated rationale behind this logarithmic production scale was to introduce more new coins onto the network earlier in its lifespan. Also, lower rewards would hopefully matter less in future due to transaction fees from increased usage… and higher bitcoin prices.

At the first halving, 10,500,000 BTC was already in existence — that’s over half the maximum total of around 21 million.

Kaiko also has a calculator to show how many bitcoins will exist at every point in time until 2029. Bitcoins will continue to be mined for over 100 years after that.

What effect will halving have?

Everyone will be watching bitcoin in July 2016. Will the price of bitcoin begin to increase at a greater rate after rewards drop to 12.5? And if not, will miners lose interest and start to switch off their machines?

Or will it signal a new era for bitcoin, raising value through greater scarcity, making bitcoins even more desirable?

Since halving has only occurred once before, let’s look at the data from that time to see what effect it had.

Bitcoin was a very different world then. At that time, 1 BTC was worth around USD$12.10 and there was comparatively little real-world use.

While there were no sudden or dramatic price increases until early 2013, it’s important to note that the bitcoin value increased steadily from around halving day onward, and has never since fallen below its 28 November 2012 level.

There was also no corresponding drop in the hash rate — half the rewards did not deter new miners from joining the network. In fact, quite the opposite, since block 210,000 was mined with a common computer graphics card. That’s a far cry from the massive, ASIC-based mining facilities that drive the bitcoin network today.

So while it’s exciting to watch the seconds counting down, perhaps you shouldn’t expect anything spectacular to happen as soon as the clock hits zero. But who knows? There are a lot more people watching bitcoin now, many of whom have become interested in the years since November 2012.

At Kaiko, we find all data points on the bitcoin network fascinating, even the smallest blips. We’ll be watching closely, and be among the first to let you know what happens.

Watch the countdown clock, and monitor all other aspects of the bitcoin network in fine detail at Kaiko.com. As always, our data feeds are available for use by anyone via our free APIs.