What is the point of Bitcoin halving?

[Hashura]

Hello, I have been reading the guides from learnmeabitcoin recently when I have spare time. There was this note from the author in the mining guide for beginners.

Furthermore, you'll also receive a block reward for your effort (which also includes any fees from the transactions you've added to the blockchain).

https://static.learnmeabitcoin.com/beginners/guide/mining/04-node-pool-string-nonce-success-reward.png

Note: The block reward is no longer 25 BTC (I originally wrote this article in 2015).

I click the link for block reward and from there, the concept of bitcoin halving caught my interest. So I wanted to ask, what's the purpose of starting the block subsidy at 50 BTC then halving it every after 210,000 blocks? Would there have been a difference if a fixed amount was used instead??

[Zaguru12]

I usually call it calculated mathematical guess because you can not call it just an ordinary guess because the block reward starting at 50 BTC then halved every 210,000 blocks all coincide with the total bitcoin to ever exists at 20999999.97 bitcoin (approximately not more than 21 million).

Because of you divide the block reward into halves until it turns zero you would have this total supply of not more than 21 million bitcoin as total supply and this was a brilliant mathematical calculation done by Satoshi himself.

If there was a fixed amount say 50 BTC every block reward there wouldn’t be any limitation to the supply just a constant 10500000 BTC mined after every 210,000 blocks.

But with halving you the number of bitcoin mined every 210,000 been halved until there is none left to mine when block reward is  0.00000001 which is insignificant and then having bitcoin supply capped at 20.999999 million


You can look here for more details
https://en.bitcoin.it/wiki/Controlled_supply#Projected_Bitcoins_Long_Term

[Hashura]

If there was a fixed amount say 50 BTC every block reward there wouldn’t be any limitation to the supply just a constant 10500000 BTC mined after every 210,000 blocks.

Could it not have been like a 3 BTC reward every block, then no more (except for transaction fees) once all 21 million BTC has been mined? These are just noob hypothetical questions btw, I have no idea if it's even possible or not, just trying to satisfy my curiosity.

You can look here for more details
https://en.bitcoin.it/wiki/Controlled_supply#Projected_Bitcoins_Long_Term

Ok, thank you. It looks like there is no explanation on why he used those values.

Satoshi has never really justified or explained many of these constants.

[Ambatman]

I click the link for block reward and from there, the concept of bitcoin halving caught my interest. So I wanted to ask, what's the purpose of starting the block subsidy at 50 BTC then halving it every after 210,000 blocks? Would there have been a difference if a fixed amount was used instead??

It was a strategic decision one that has shown to have played out well
The start was to draw people in and prepare for increase adoption
And it also benefits those that were able to see future with the project.

Yes there would have been difference
The beauty about halving it has a decreasing supply quite similar to how Gold is projected today
And the decreasing supply
Brings a shock and helps in controlling inflation
If they came out too fast
I doubt Bitcoin would be worth up to a thousand dollar today
No anticipation and it would get boring. I

[Zaguru12]

If there was a fixed amount say 50 BTC every block reward there wouldn’t be any limitation to the supply just a constant 10500000 BTC mined after every 210,000 blocks.

Could it not have been like a 3 BTC reward every block, then no more (except for transaction fees) once all 21 million BTC has been mined? These are just noob hypothetical questions btw, I have no idea if it's even possible or not, just trying to satisfy my curiosity.

That means it would have been 630,000 BTC every 210,000 approximately 4 years with 10 minute still measured as an average time for mining of each block. There would have been nothing like halving but rather continuous mining until 20.999 million bitcoin is mined. So it wouldn’t have made sense, mind you this numbers are related;

1. Starting with 50 BTC as block reward,
2. Halving at every 210,000 block
3. Average mining time set at 10 minutes ( which is controlled by adjusting difficulty every 2,016 blocks)
4. Total supply at 20.99999 million bitcoin (~21 million)

All this wouldn’t have aligned if a change happens like block reward placed at constant 3 BTC

Ok, thank you. It looks like there is no explanation on why he used those values.

Satoshi has never really justified or explained many of these constants.

That’s why I said even if this is a guess then it is a brilliant and also a mathematically calculated guess

[arzuo]

Halving Until 2040, One Bitcoin has 100,000,000 satoshis.

The design of the system of Bitcoin is based on 210,000 blocks per halving. All this is organized mathematically in balance.

These figures have not been selected randomly, they were selected in such a way that they preserve that balance.

Example:

Suppose, you are requested to share 100 eggs between 10 individuals, then each individual would have 10 eggs. The reason is that the distribution is based on a simple and rational mathematical rule.
Similarly, the parameters of Bitcoin, including the total supply, halving time, block rewards, and the whole system are all calculated based on mathematical concepts to guarantee fairness, predictability, and balance in the system.

[BitMaxz]

There appears to be no specific reason why Satoshi chose to give a 50BTC reward as a starting point and divide it by two on every block halving.
According to some Google quotes, that is Satoshi's best guess for rewarding early participants and adopters, even though it has no value.

It seems that Satoshi thinks about the "Gold Analogy" and applies it to BTC. Look at the Bitcoin.pdf part quoted below

The steady addition of a constant of amount of new coins is analogous to gold miners expending
resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.

Source: https://bitcoin.org/bitcoin.pdf


I got this quoted below from reddit here https://www.reddit.com/r/Bitcoin/comments/m14sir/anyone_who_owns_21_bitcoins_is_a_millionaire_today/

“I wanted to choose something that would make prices similar to existing currencies, but not knowing the future, it is very difficult. I ended up choosing something in between”, Nakamoto said in an email to Hearn.

Based on what I understand, it appears that all of them are just guesses, with no specific reason why he began with 50BTC as a reward and then halved it every 210,000 blocks.

But his purpose, as we can tell, is to grow its value and fairly distribute the reward, which is exactly what we are seeing right now.
And the 50 BTC reward is to encourage participants to participate and help the network be more secure.
And block halving to tighten the reward, with each block halving reducing supply and driving up the price.

[WannaParadise]

Hello, I have been reading the guides from learnmeabitcoin recently when I have spare time. There was this note from the author in the mining guide for beginners.

Furthermore, you'll also receive a block reward for your effort (which also includes any fees from the transactions you've added to the blockchain).

https://static.learnmeabitcoin.com/beginners/guide/mining/04-node-pool-string-nonce-success-reward.png

Note: The block reward is no longer 25 BTC (I originally wrote this article in 2015).

I click the link for block reward and from there, the concept of bitcoin halving caught my interest. So I wanted to ask, what's the purpose of starting the block subsidy at 50 BTC then halving it every after 210,000 blocks? Would there have been a difference if a fixed amount was used instead??

The Bitcoin halving controls inflation by halving the new supply of BTC at regular intervals and supports the goal of capping the total supply at 21 million. Initially, a high block reward of 50 BTC encouraged mining investment and security during the networks early stages halvings however create a sense of scarcity by ensuring that the increase in supply follows a predictable and diminishing trajectory over time. Had a fixed reward been implemented, either the total supply target would not have been met or inflation would have remained constant and persistent. this would have weakened the currencys store of value function. I think, the halving demonstrates that by altering miner incentives in the long term. it necessitates transaction fees becoming a more decisive factor this represents both a natural transition for the protocol and an operational risk. Some of my colleagues argue that the gradual reduction in the reward could put pressure on decentralisation and security. however, i believe the system will remain sustainable through the adaptation of market mechanisms and fees...

[Mia Chloe]

I click the link for block reward and from there, the concept of bitcoin halving caught my interest. So I wanted to ask, what's the purpose of starting the block subsidy at 50 BTC then halving it every after 210,000 blocks? Would there have been a difference if a fixed amount was used instead??

It's simply because of demand and supply. Satoshi projected the idea to basically serve the whole world as an alternative P2P cash system and that means with that supply you need to constantly account for demand against supply. The best way to achieve this mathematically was to use a geometrically decreasing supply instead of a constant supply.

The beauty about halving it has a decreasing supply quite similar to how Gold is projected today
And the decreasing supply

Gold still tops the chart because of centralization. The government an some strategic bodies were already able to strategically centralize gold which is one major reason for it's price progression.

[SeriouslyGiveaway]

I click the link for block reward and from there, the concept of bitcoin halving caught my interest. So I wanted to ask, what's the purpose of starting the block subsidy at 50 BTC then halving it every after 210,000 blocks? Would there have been a difference if a fixed amount was used instead??

It is programmed like this to make likely new supply shock with each halving and Satoshi Nakamoto also chose the halving cycle is 210,000 blocks that last about four years so that Bitcoin halving year will be in years with the USA. President Elections. I don't know, it possibly was chosen intentionally by Satoshi Nakamoto or it was chosen without intention to link Bitcoin halving years to the USA. President Election years.

It's only one factor among many ones that contribute to Bitcoin value. Altcoins have halving too, and they even have smaller total supplies than Bitcoin but such altcoins don't have as same high value as Bitcoin, even have lower value than Bitcoin, and worst have no value.

Controlled supply.
Bitcoin Equivalent Network Time.
How is the 21M bitcoin cap defined and enforced?
Can Bitcoin's hard cap of 21 million be changed?
What will happen to Bitcoin after all 21 million are mined?

[PrivacyG]

what's the purpose of starting the block subsidy at 50 BTC then halving it every after 210,000 blocks? Would there have been a difference if a fixed amount was used instead??

I remember there were a few interesting facts about these numbers but I can not find them.  The purpose mainly has to do with making Bitcoin a deflationary Asset in a very calculated manner.  It is easy to understand how the Supply works the way Satoshi built it.

Every four years, you get half the reward for the same effort.  If there was a 3 Bitcoin reward per Block constantly until the maximum Supply was reached, it would not become scarcer.  It would not even feel scarcer until the last Block is Mined.

[letteredhub]

It's simple to understand why the block rewards isn't fixed when you understand why bitcoin was created in the first instance. The halving and block reduction is to ensure an upper hand by bitcoin over inflation which is what the fiat couldn't do and if bitcoin as an alternative can't stay ahead of inflation then of what alternative does it really project for it's miners and holders. So the block reduction and halving leads to scarcity and increased in value from increase in demand as I understood.

[Zoomic]

If there was a fixed amount say 50 BTC every block reward there wouldn’t be any limitation to the supply just a constant 10500000 BTC mined after every 210,000 blocks.

Could it not have been like a 3 BTC reward every block, then no more (except for transaction fees) once all 21 million BTC has been mined? These are just noob hypothetical questions btw, I have no idea if it's even possible or not, just trying to satisfy my curiosity.

Smart thought. It could have been any other number apart from 50 BTC. I also do not think that there is any mathematical backup for choosing 50 BTC as the block reward.
Why I think Satoshi didn't choose 3 or any other smaller number is because of the value of BTC then. Bitcoin was worth nothing but as at the 50 BTC when collected multiple times could compensate for your time and energy which 3BTC could not do. I think that was the reason for somewhat higher value.

[SquirrelJulietGarden]

Smart thought. It could have been any other number apart from 50 BTC. I also do not think that there is any mathematical backup for choosing 50 BTC as the block reward.
Why I think Satoshi didn't choose 3 or any other smaller number is because of the value of BTC then. Bitcoin was worth nothing but as at the 50 BTC when collected multiple times could compensate for your time and energy which 3BTC could not do. I think that was the reason for somewhat higher value.

It's more related to math.

How is the 21M bitcoin cap defined and enforced?

This is like saying...

  50 * 210000
+ 25  * 210000
+ 12.5  * 210000
…
+ 0.00000002 * 210000
+ 0.00000001  * 210000
= 20999999.9769

But let's see why 21M but not another number?
https://plan99.net/~mike/satoshi-emails/thread1.html

My choice for the number of coins and distribution schedule was an educated guess.  It was a difficult choice, because once the network is going it's locked in and we're stuck with it.  I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that's very hard.  I ended up picking something in the middle.  If Bitcoin remains a small niche, it'll be worth less per unit than existing currencies.  If you imagine it being used for some fraction of world commerce, then there's only going to be 21 million coins for the whole world, so it would be worth much more per unit.  Values are 64-bit integers with 8 decimal places, so 1 coin is represented internally as 100000000.  There's plenty of granularity if typical prices become small.  For example, if 0.001 is worth 1 Euro, then it might be easier to change where the decimal point is displayed, so if you had 1 Bitcoin it's now displayed as 1000, and 0.001 is displayed as 1.

[Dex_master25]

The halving from my knowledge and research is a main component of Bitcoin's monetary and economic policy, built into its protocol. It acts as a means to control inflation, and therefore makes the network more efficient while it also aims to reward the miners and developers for maintenance of the system. The halving helps to drive Bitcoin's long term value and ensure it fulfill the 21million cap that is already set in motion.

[Hashura]

Thank you everyone for the answers, and links for further reading! I will check it when I have more time.

But let's see why 21M but not another number?
https://plan99.net/~mike/satoshi-emails/thread1.html

My choice for the number of coins and distribution schedule was an educated guess.  It was a difficult choice, because once the network is going it's locked in and we're stuck with it.  I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that's very hard.  I ended up picking something in the middle.  If Bitcoin remains a small niche, it'll be worth less per unit than existing currencies.  If you imagine it being used for some fraction of world commerce, then there's only going to be 21 million coins for the whole world, so it would be worth much more per unit.  Values are 64-bit integers with 8 decimal places, so 1 coin is represented internally as 100000000.  There's plenty of granularity if typical prices become small.  For example, if 0.001 is worth 1 Euro, then it might be easier to change where the decimal point is displayed, so if you had 1 Bitcoin it's now displayed as 1000, and 0.001 is displayed as 1.

So good to see this actual satoshi email. Now this explains a lot!

[ZaryBee]

The halving from my knowledge and research is a main component of Bitcoin's monetary and economic policy, built into its protocol. It acts as a means to control inflation, and therefore makes the network more efficient while it also aims to reward the miners and developers for maintenance of the system. The halving helps to drive Bitcoin's long term value and ensure it fulfill the 21million cap that is already set in motion.

Thats what makes bitcoin different from most money systems. Instead of creating new coins at a steady or increasing rate, bitcoin keeps slowing it down. Every halving cuts the reward miner gets, so over time, new supply become smaller and smaller.

If you look at it, the rewards used to be much higher in the early days, but now it's already down to a small fraction of that. That change doesn't just affect miners, it also shapes how scarce bitcoin becomes in the long run. The fixed supply is a big reason people trust bitcoin, you can clearly see how much will exist and how its released over time, which isnt the case with fiat.