When Bitcoin was launched, it was designed with an inherent supply cap of 21 million coins and was to be distributed, according to Satoshi Nakamoto (Bitcoin founder)’s words part of a 2008 email posted to a cryptography interest group mailing list, at a constant rate. The exact and precise reasons behind this number are not known in detail but in an email post from Satoshi Nakamoto, in December 2010, it was described that the figure of 21 million was an educated guess and that with the devised distribution scheme, the math worked out to round numbers.
Since not all 21 million Bitcoin was readily accessible from the genesis of Bitcoin, the system was designed so that chunks of the 21 million supply of Bitcoin be made available on a periodic basis through a “mining” process. Therefore, new Bitcoin gets mined each time a new block is appended to the Bitcoin blockchain (this is achieved roughly every 10 minutes). Prior to be appended to the Bitcoin blockchain, new blocks need to get “discovered” by miners, using large amounts of computational power and each new discovered block earns its author a predefined amount of Bitcoin as reward (a block reward is called a “Coinbase”).
The amount of earned Bitcoin through block mining (akin to a raffle) was designed to vary in time: in fact, the Bitcoin protocol stipulates that a coinbase reward diminishes at a constant rate over time. This variation however is not a linear function but rather as a step function, whereby it decreases by half (hence the “Halving”, or “Halvening”, a portmanteau of happening and halving) after each new set of 210,000 blocks. The very first set of coinbase rewards amounted to 50 BTC (back in 2009 when Bitcoin was launched).
The first halving occurred on November 28th, 2012 while the second one took place on July 9th, 2016. Today, May 11th, 2020, the 630,000th raffle will be held, meaning that the reward will decrease, as expected, from 12.5 BTC to 6.25. Today, is the third halvening, which explains the lot of the excitement you might be hearing on social platforms.
Do you have more questions on this? Feel free to reach out to your experts at
Catallaxy.
