What exactly is bitcoin halving?

[jacee]

So in the speculation board I see posts that says bitcoin price will go up ince the halving occurs. What halving is really? How does it affects the price of bitcoin? Kindly please explain as I don't have any idea what these are.

[1714844645]

1714844645

[BurtW]

For the first four years that Bitcoin existed miners were paid 50 Bitcoins per block.  Then after those four years the amount paid to the Bitcoin miners was cut in half to 25 Bitcoins per block.  This was the so called "first halving" now after the second four years the amount paid to the miner is scheduled to be cut in half again, this time to 12.5 Bitcoins per block.  This is the second "halving".  By design the amount paid to the Bitcoin miners will be cut in half about every four years until the year 2140.

[ronald98]

It's when the number of coins the miners get for mining each block gets reduced by half. Today they get 25 Bitcoins for mining each block, and there's about 6 blocks mined per hour. During next summer the number of coins they get for each block gets reduced to 12 and a half.

Miners have to pay electricity bills that mining runs up so they frequently sell their mined Bitcoins and that brings the price of Bitcoin down. When the number of coins they get for mining gets reduced by half next summer they will only have half as many coins to sell as they do now. That should help the Bitcoin price rise because there will be less pressure pushing it down from miners selling.

[BurtW]

BTW the current estimate as to exactly when the miner reward will go from 25 to 12.5 BTC per block is:

Reward-Drop ETA: 2016-07-25 22:11:50 UTC (39 weeks, 5 days, 9 hours, 50 minutes)

[Mikestang]

The halving refers to the reward for solving a block.  Satoshi outlined in his white paper how the supply of bitcoin would be controlled, that the reward for solving a block would be cut in half every 210,000 blocks, roughly every 4 years.  The reward started at 50btc and is currently 25btc, it will go down to 12.5btc at some point in 2016.

Lots to read from a basic google search, https://www.google.com/search?q=bitcoin+halving

[gentlemand]

Some people think that the subsequent reduction in supply will drive up the price. I don't really buy that. There's already enough coins out there to meet demand and of the coins traded every day, the volume is multiple times more than the mined coins arriving. If demand rose significantly then it might be a factor but outside sentiment, which is more important than anything so it does count, I don't think there's any other reason for it to rise.

[jacee]

It's when the number of coins the miners get for mining each block gets reduced by half. Today they get 25 Bitcoins for mining each block, and there's about 6 blocks mined per hour. During next summer the number of coins they get for each block gets reduced to 12 and a half.

Miners have to pay electricity bills that mining runs up so they frequently sell their mined Bitcoins and that brings the price of Bitcoin down. When the number of coins they get for mining gets reduced by half next summer they will only have half as many coins to sell as they do now. That should help the Bitcoin price rise because there will be less pressure pushing it down from miners selling.

I see, this answers my question clearly. So basically it's the miners keeping their coins in them and not selling them because they only get half of the original coins that they are getting now after the 2nd halving?
So if these miners still wants to sell their coins, then no price increase will happen to bitcoin?  

[chennan]

It's when the number of coins the miners get for mining each block gets reduced by half. Today they get 25 Bitcoins for mining each block, and there's about 6 blocks mined per hour. During next summer the number of coins they get for each block gets reduced to 12 and a half.

Miners have to pay electricity bills that mining runs up so they frequently sell their mined Bitcoins and that brings the price of Bitcoin down. When the number of coins they get for mining gets reduced by half next summer they will only have half as many coins to sell as they do now. That should help the Bitcoin price rise because there will be less pressure pushing it down from miners selling.

Yep, pretty much this.  The fact that bitcoins will be "more scarce" to the miners and exchange sites, that will make bitcoin more valuable; assuming that the demand for bitcoins will remain the same. 

Consider the Californian Gold Rush for example... when (actual) miners started out, they were finding tons of gold and selling them to make a living.  Since then, the price of gold is a lot more than what the miners of those times were selling their gold for.

[jacee]

Some people think that the subsequent reduction in supply will drive up the price. I don't really buy that. There's already enough coins out there to meet demand and of the coins traded every day, the volume is multiple times more than the mined coins arriving. If demand rose significantly then it might be a factor but outside sentiment, which is more important than anything so it does count, I don't think there's any other reason for it to rise.

I understand the supply and demand thing. So what you mean is that the price increase after the halving does not have a solid proof that it will really increase at all?

[gentlemand]

Yep, pretty much this.  The fact that bitcoins will be "more scarce" to the miners and exchange sites, that will make bitcoin more valuable; assuming that the demand for bitcoins will remain the same.  

Consider the Californian Gold Rush for example... when (actual) miners started out, they were finding tons of gold and selling them to make a living.  Since then, the price of gold is a lot more than what the miners of those times were selling their gold for.

But it's just less dilution and inflation. Nothing's more scarce. There's just as many coins as there were before and plenty are always up for sale. If we completely discount China, 24 hour trading volume was around 80,000 BTC. Not that I believe mined coins hit exchanges all that often anyway, but the halving is only 1800 coins less per day.

[DooMAD]

Some people think that the subsequent reduction in supply will drive up the price. I don't really buy that. There's already enough coins out there to meet demand and of the coins traded every day, the volume is multiple times more than the mined coins arriving. If demand rose significantly then it might be a factor but outside sentiment, which is more important than anything so it does count, I don't think there's any other reason for it to rise.

I understand the supply and demand thing. So what you mean is that the price increase after the halving does not have a solid proof that it will really increase at all?

Definitely no guarantees.  It's more optimism than anything else.  I suspect quite a few people expecting a sudden launch to the moon are going to be disappointed.  I think at best there will be a slight uptick.  Certainly nothing major (although I'll welcome being wrong on that one    ).

[gentlemand]

I understand the supply and demand thing. So what you mean is that the price increase after the halving does not have a solid proof that it will really increase at all?

Why should it? If the halving destroyed half the previous mined coins then a price rise makes sense. There's just a modest percentage less arriving every day. That makes no difference if there isn't a decent amount of demand. The halving and what someone on an exchange is willing to buy or sell for aren't very closely related. There are plenty of BTC users who probably don't even know what it means.

[jacee]

Some people think that the subsequent reduction in supply will drive up the price. I don't really buy that. There's already enough coins out there to meet demand and of the coins traded every day, the volume is multiple times more than the mined coins arriving. If demand rose significantly then it might be a factor but outside sentiment, which is more important than anything so it does count, I don't think there's any other reason for it to rise.

I understand the supply and demand thing. So what you mean is that the price increase after the halving does not have a solid proof that it will really increase at all?

Definitely no guarantees.  It's more optimism than anything else.  I suspect quite a few people expecting a sudden launch to the moon are going to be disappointed.  I think at best there will be a slight uptick.  Certainly nothing major (although I'll welcome being wrong on that one   ).

Some people think that the subsequent reduction in supply will drive up the price. I don't really buy that. There's already enough coins out there to meet demand and of the coins traded every day, the volume is multiple times more than the mined coins arriving. If demand rose significantly then it might be a factor but outside sentiment, which is more important than anything so it does count, I don't think there's any other reason for it to rise.

I understand the supply and demand thing. So what you mean is that the price increase after the halving does not have a solid proof that it will really increase at all?

No there is no true way to know that it will increase, just theories that it will.

Now there goes my bubbles of hope that bitcoin will reach a higher price after the halving. I've thought about all the stuffs I read on the speculation board and guess everyone is hoping for the same.

[RodeoX]

The last halving was a non-event. Speculation was that the reduction was factored in months before the block reward drop.

[BurtW]

At the first halving there were 10.5 million BTC and the subsidy went from 50 to 25

At the next halving there will be 15.75 million BTC and the subsidy will go from 25 to 12.5

So since the monetary base will be larger and the drop in daily production is smaller the effect of this next halving should be less than the effect of the first halving.

As was stated, after all the wringing of hands and euphoria around the last halving the net effect was about zero.

I expect that after all the "end of the world" hand wringing and the "price will double" euphoric expectation the net effect of the next halving will also be about zero.

[Amph]

At the first halving there were 10.5 million BTC and the subsidy went from 50 to 25

At the next halving there will be 15.75 million BTC and the subsidy will go from 25 to 12.5

So since the monetary base will be larger and the drop in daily production is smaller the effect of this next halving should be less than the effect of the first halving.

As was stated, after all the wringing of hands and euphoria around the last halving the net effect was about zero.

I expect that after all the "end of the world" hand wringing and the "price will double" euphoric expectation the net effect of the next halving will also be about zero.

well it can't keep on remaining on zero for every halving, otherwise we know what will happen to the miners industry

basically it's like saying that bitcoin will die by 2020...

[dothebeats]

Some people think that the subsequent reduction in supply will drive up the price. I don't really buy that. There's already enough coins out there to meet demand and of the coins traded every day, the volume is multiple times more than the mined coins arriving. If demand rose significantly then it might be a factor but outside sentiment, which is more important than anything so it does count, I don't think there's any other reason for it to rise.

I understand the supply and demand thing. So what you mean is that the price increase after the halving does not have a solid proof that it will really increase at all?

No certainties. Pretty simple, I must say: if demand stays the same or increase, value will increase; if demand decrease and supply decrease, price will go down. Also in the second scenario, miners that won't profit in these terms would likely leave the scene for a while or leave completely.

[remotemass]

Every 10 minutes the latest bitcoin transactions between bitcoin addresses
enter the blockchain to become permanent on the history of bitcoin transactions.
All miners are trying to guess the solution to a puzzle that will allow the first one to solve it to insert the next block (basically, a list of transactions with a header) into the chain. The lucky miner that was able to guess the solution is rewarded.
In the first fours years, the reward was 50 BTC. So 50 BTC would be added to the number of BTC in circulation, every 10 minutes. Note that these bitcoins weren't "associated" with any bitcoin address. So they didn't exist! They come into existence from the infinite number of bitcoins that only exist in a potential form but never came into existence and become actual.
It is as if an infinite number of bitcoins already exist and will ever do; but will never become real.
From that infinite potential/void only 21 million will be allowed to enter circulation, in the limit.
And every four years the miners reward - that they will get if they win the mining "lottery" - is halved. So right now it is 25 BTC. Next halving 12.5 BTC. In the next 6.25 BTC... and so and so forth. Till the sum of all rewards that ever happened approaches the limit of 21 million.

The limit of 21 million bitcoins is hard coded in the distributed software implementation with a schedule and results from the accumulation of 50 bitcoins reward each ten minutes during the first four years(50x6x24x365x4=10 512 000), plus, half, 25 bitcoins reward each ten minutes during the following four years (5256 000+10 512 000= 15 768 000), plus, half, 12.5 bitcoins reward each ten minutes during the following four years (2 628 000+5 256 000+10 512 000=18 396 000)... and so on and so forth, till the reward of the four years before is so that it doesn't add nothing to the total of "almost" 21 million, more precisely: 20999999.97690000 BTC.

This protocol implementation results from a few lines of code in the distributed software, and everyone would have to agree to change it otherwise incompatibility would arise to anyone trying to change that.

[Enjorlas]

It's quite simple. If everything stays the same but supply decreases, the price will rise.. or at least drop at a slower rate.

[Mickeyb]

At the first halving there were 10.5 million BTC and the subsidy went from 50 to 25

At the next halving there will be 15.75 million BTC and the subsidy will go from 25 to 12.5

So since the monetary base will be larger and the drop in daily production is smaller the effect of this next halving should be less than the effect of the first halving.

As was stated, after all the wringing of hands and euphoria around the last halving the net effect was about zero.

I expect that after all the "end of the world" hand wringing and the "price will double" euphoric expectation the net effect of the next halving will also be about zero.

well it can keep on remaining on zero for every halving, otherwise we know what will happen to the miners industry

basically it's like saying that bitcoin will die by 2020...

Why not? He meant that upcoming halving will have a zero effect on the price just prior and after the halving. This doesn't mean that Bitcoin will dissappear. We might as well have some game changing things that would propel us to the moon happening 6 months after the halving.

This would mean that the halving had zero effect on the current Bitcoin price but we still went up and haven't died as you suggested.