Every four years, Bitcoin undergoes a “halving,” which cuts the daily supply of newly minted coins by 50%—an event that’s historically caused prices to soar. As the next halving rapidly approaches, on or around April 19, investors are waiting to see whether this familiar pattern is repeated.
Bitcoin has already climbed 60% this year, reaching an all-time high of over $72,000 in March. This has been driven by investors flocking to newly launched ETFs that allow them to buy Bitcoin in the form of shares on a stock exchange. But it’s also likely because markets know diminished supply from the halving could rally demand, and if history repeats itself, Bitcoin could outdo its 2021 bull run by a significant margin.
Here’s Fortune’s plain English guide to the Bitcoin halving: what it is, why it matters, and how it could affect the price of the original cryptocurrency.
What is a halving?
Every time a new block is added to the Bitcoin blockchain, the contributor is given some Bitcoins as a reward. This “block reward” initially consisted of 50 bitcoins but, due to a feature of Bitcoin’s code, that amount is cut in half every four years.
Previous halvings saw the block reward cut to 25 Bitcoins, then to 12.5, then to the current allotment of 6.25. The halving set for April will see the reward cut to 3.125.
Who’s adding these blocks to the Bitcoin blockchain in the first place?
Blocks are added by miners, which typically fall into three categories: retail (individuals with computers), industrial (often publicly traded, operating data farms), and mining pools (groups of miners who combine efforts over a network).
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Anyone can be a miner and eligible for rewards—which are issued every 10 minutes or so—if they download the Bitcoin program and run it on their computers.
Rewards go to whomever is first to solve a complex math problem using trial-and-error calculations on a specialized computer. The mining is an integral part of updating transactions on the Bitcoin blockchain and keeping the network secure.
When are halvings?
Halvings occur after 210,000 blocks are created—roughly every four…
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