Shortly after the release of the Bitcoin white paper, Nakamoto, the founder of Bitcoin, summarized the various consequences of the monetary policy of halving. If the halving arrives and block compensation is halved, deflation or inflation may occur. If the purchasing power to buy products or services with Bitcoin decreases, deflation occurs, and on the contrary, if the price of products or services that can be purchased with Bitcoin increases, inflation occurs.
In the early days of development, Nakamoto did not predict how many people would use Bitcoin. Therefore, he did not explain why he applied the formula of halving. The following one sentence is all that has been said about this part.
“I think it’s best to distribute coins at a certain rate at an early stage somehow.”
Bitcoin miners mine blocks using expensive electronic equipment. Compensation is given for the blocks mined in this way, and new bitcoin is created and entered the market.
Every time 210,000 blocks are stacked, the amount of compensation for bitcoin mining is reduced by half in approximately four-year cycles. This period is called the halving.
Bitcoin, which appeared in 2009, is limited to a total of 21 million mining units, with a halving in which compensation is halved every four years. When Bitcoin was first released, 50 bitcoins were compensated per block, but now it has decreased to 6.25 after three half-lives. As supply decreases, scarcity increases, and in fact, Bitcoin has risen up to 9073%, 2833%, and 688% in the past three halving.
The fourth halving is expected to be next year, and the cryptocurrency industry and the financial investment industry are conflicting with skepticism that “the Bitcoin surge will occur as before” and “this time will be different.”
In 2009, when Bitcoin first came to the world, 50 Bitcoin could be received by stacking one block every 10 minutes. After two half-lives, mining compensation is now 12.5, and the total supply of Bitcoin is set at 21 million. By 2140, Bitcoin given through mining is expected to run out.