Bitcoin's mining reward is halved every four years, reducing the rate of new coin creation from "summary" of The Bitcoin Standard by Saifedean Ammous
Bitcoin's mining reward is halved every four years, reducing the rate of new coin creation. This mechanism is known as the "halving," a feature that is hard-coded into the Bitcoin protocol. The purpose of the halving is to control the supply of new bitcoins entering the market, thereby ensuring scarcity and preventing inflation. In the early days of Bitcoin, the mining reward was set at 50 bitcoins per block. Every four years, this reward is cut in half, leading to a reduction in the rate of new coin creation. This process continues until all 21 million bitcoins have been mined, which is estimated to occur around the year 2140. The halving mechanism is essential for maintaining the integrity of the Bitcoin network and ensuring its long-term sustainability. By reducing the rate of new coin creation, the halving helps to counteract inflation and preserve the value of existing bitcoins. This scarcity is a key feature of Bitcoin's value proposition, as it distinguishes the digital currency from fiat currencies that can be printed endlessly. As a result of the halving, miners are incentivized to continue supporting the network by validating transactions and securing the blockchain. With each halving, the reward for mining a block is reduced, making it more challenging for miners to earn bitcoins. However, this difficulty adjustment is necessary to ensure that new coins are distributed at a controlled and predictable rate.- The halving mechanism is a fundamental aspect of Bitcoin's design that sets it apart from traditional monetary systems. By periodically reducing the rate of new coin creation, Bitcoin is able to maintain scarcity, prevent inflation, and uphold its value proposition as a sound form of money.
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