This article is part of an ongoing series on the significance of Bitcoin’s third halving, expected to take place around May 13, 2020. Further reading:
“The halvening” sounds like a horror movie about an ax murderer. But it’s actually the nickname for one of the most hotly anticipated events in Bitcoin’s history.
Sometime in May, the number of bitcoins (BTC) entering circulation every 10 minutes (known as block rewards) will drop by half, to 6.25 from 12.5. It’s a milestone that’s easy to see coming because it happens every four years and has happened twice before.
The allure of possible riches is what’s drawing so much attention to the upcoming event, which is more commonly referred to as the halving (some wags like to add the “en” to make it sound ominous). The amount of supply entering the system will suddenly shrink but the demand will, in theory, stay the same, possibly driving up the cryptocurrency’s price. As such, the event has inspired passionate debate about how the market will respond.
“The theory is that there will be less bitcoin available to buy if miners have less to sell,” said Michael Dubrovsky, co-founder of mining R&D nonprofit PoWx.
But the periodic decline in Bitcoin’s minting rate could have a deeper significance than any near-term price movements for the functioning of the currency. The block reward is an important component of Bitcoin, one that ensures the security of this leaderless system. As the rewards dwindle to zero in the decades ahead, it could potentially destabilize the economic incentives underlying bitcoin’s security.
For those trying to make sense of this complex topic, CoinDesk offers the following explainer of Bitcoin’s third halving.
What is the halving?
New bitcoins enter circulation as block rewards, produced by “miners” who use expensive electronic equipment to earn or “mine” them.
Every 210,000 blocks, or roughly every four years, the total number of bitcoin that miners can potentially win is…