Halving

The best-known example is bitcoin, which undergoes a halving roughly once every four years. New BTC enters circulation through mining, with successful miners given newly minted BTC as a block reward (alongside transaction fees).

When bitcoin launched in 2009, miners on the network received 50 BTC per block. Since then, four bitcoin halvings have occurred — in 2012, 2016, 2020 and 2024 — bringing the block reward down to 3.125 BTC. These events occur once every 210,000 blocks, with the new one forecasted to occur in 2028. In future, small fractions of BTC will be paid out to miners until the maximum supply of 21 million coins is reached.

Periodically cutting the block rewards in this manner helps control supply inflation. However, it has a negative impact on miners, whose income from newly issued bitcoin drops by 50%. Over the course of bitcoin’s existence, the effects of halvings have generally been offset by its price appreciation. As block rewards tend down towards zero, however, transaction fees will play an increasingly important role in the incentive mechanism.

On the other hand, halvings are typically a positive signal for investors: the resulting supply reduction typically precedes major crypto bull markets. While historically true, bull markets also depend on broader market and macroeconomic conditions, so future halvings are no guarantee of price appreciation.

Aside from bitcoin, some other Proof-of-Work blockchains employ a halving mechanism. For example, Litecoin halves its own mining rewards every 840,000 blocks (also approximately once every four years).