Satoshi Nakamoto developed a mathematical function with the goal of controlling Bitcoin’s inflation in a programmed and declining manner. This mechanism is fundamental to maintaining the maximum limit of Bitcoin that can be created, set at 21 million. The function involves an event known as the “Halving,” which occurs every 210,000 blocks, roughly every four years.
During each Halving cycle, the reward that miners receive for adding a new block to the blockchain is halved. When Bitcoin was launched in 2009, the reward per block was 50 Bitcoin. Over the years, this value was halved at regular intervals: in 2012, it dropped to 25 Bitcoin; in 2016, to 12.5 Bitcoin; in 2020, to 6.25 Bitcoin; and in 2024 to 3.125 Bitcoin. This progression contributes to creating a programmed scarcity, increasing investor interest, and reinforcing the perception of Bitcoin as “digital gold.”
The cumulative effect of the Halving cycles is that within the first 15 years of the protocol’s life, over 90% of all Bitcoin that will ever exist have been generated. This aspect gives Bitcoin a declining inflation curve, differentiating it from traditional fiat currencies, which can be printed without limits. The Halving mechanism also encourages miners to seek efficiency and innovate to maintain profitability, especially as rewards decrease.
The Halving has a significant impact on the value of Bitcoin and the cryptocurrency market as a whole. Each cycle tends to be followed by an increase in demand and price, as the supply of new Bitcoin is reduced while the system approaches the 21 million maximum limit. This emission model also plays a crucial role in the network’s security, incentivizing miners to participate and support the Bitcoin blockchain.
Ultimately, the Halving cycle system is a key element of Bitcoin’s architecture, designed to promote the stability, security, and long-term predictability of the cryptocurrency. This approach has contributed to solidifying Bitcoin’s reputation as a rare and valuable asset, destined to become increasingly difficult to obtain as time goes on.