Halving

Written by Evan Feng

Introduction

Halving (halvening) refers to the phenomenon where a cryptocurrency’s block reward inflation rate decreases (most commonly by 50%) upon reaching a predetermined block height.

The concept originates from the original proof-of-work public blockchain, bitcoin, whose block reward initially began at 50 BTC, and has halved roughly every ~4 years as part of the protocol-level disinflation schedule. Many other proof-of-work chains, including the various forks of BTC, have inherited the similar construction of stepwise declines in the annualized inflation rate at predetermined blockheights.

Differences in the interval between blocks, hash power, and difficulty, among other factors contribute to the differences in when halvings actually occur on the calendar, and precise expectations are impossible to nail down given the individual variation in how often a block is found. Historically, the year previous to and immediately after a bitcoin halvening has tended to correlate with outperformance against fiat pairs as the run-rate of new issuance/inflation drops, though past performance should never be relied upon as a guarantee of future results.

Suggested Reading

Bitcoin Halving: Price Effects and Historical Relevance by Fitzner Blockchain

Bitcoin Halving Explained

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