Bitcoin Supply and Halvings

A central bank can print more currency whenever it chooses to. Bitcoin can't — the rate at which new bitcoin is created is written directly into the software every participant runs, and changing it would require nearly the entire network to agree to fork away from the original rules. That fixed schedule is the starting point for understanding bitcoin as an asset.

The mechanics

Miners who successfully add a new block to the blockchain are paid a block subsidy in freshly created bitcoin. That subsidy started at 50 BTC per block in 2009 and halves every 210,000 blocks — roughly every four years, since a new block arrives on average every 10 minutes.

$$\text{Subsidy at halving } n = \frac{50}{2^n} \text{ BTC}$$

In words: each halving cuts the reward exactly in half. After the first halving it's 25 BTC per block, then 12.5, then 6.25, and so on, until eventually the subsidy rounds down to a fraction of a satoshi and issuance effectively stops.

Worked example

As of the 2024 halving, the block subsidy is 3.125 BTC. How much new bitcoin enters circulation in one year at that rate, and how does that compare to circulating supply of roughly 19.7 million BTC?

1. Blocks per year. $\frac{365 \times 24 \times 60}{10} \approx 52{,}560$ blocks.
2. New supply per year. $52{,}560 \times 3.125 \approx 164{,}250$ BTC.
3. As a share of circulating supply. $164{,}250 / 19{,}700{,}000 \approx 0.83\%$ — under 1% annual inflation, and it halves again roughly every four years from here.

What this means in practice

Halvings matter to markets because they mechanically cut the flow of new sell pressure from miners in half overnight — miners who used to need to sell, say, 900 BTC a day to cover costs now only mine 450 BTC a day worth of new coin, all else equal. Whether that supply shock actually moves price depends on demand staying constant or growing, which is exactly the debate every halving cycle reignites; the halving itself is a supply-side certainty, but its price effect is not.