Understanding the term
In the context of crypto, halving is the process of the periodical reduction of the block subsidy provided to miners in a blockchain. This function preserves the issuance rate of a crypto asset, ensuring that its maximum supply is ultimately reached.
Halving is a crucial aspect of Bitcoin’s protocol and is open source. The block reward provided to Bitcoin miners for processing transactions is cut in half every 210000 blocks mined (roughly every four years). This is done to enforce synthetic price inflation till all Bitcoins are released. This reward system is expected to continue until the year 2140 (when Bitcoin reaches 21 million).
A Bitcoin halving event is one where the reward for mining bitcoin transactions is cut in half. This helps in cutting Bitcoin’s inflation rate and rate of circulation. Bitcoin was last halved on May 11, 2020, which resulted in a block reward of 6.25 BTC. The event lowers the available amount of new supply even as demand increases, which has implications for investors.