One of the most important and revolutionary aspects of Bitcoin is its monetary policy of disinflation with a strict 21 million supply limit. Bitcoin’s model of disinflation involves cutting block rewards in half every 210,000 blocks, or 4 years. These events are affectionately known as “halvenings.”

Bitcoin’s block reward was first set at 50 BTC. Since then there have been two halvenings, leaving current rewards at 12.5 BTC per block. These will completely disappear by the 34th halvening, at which point all 21 million Bitcoin will be in circulation.

Halvenings have historically been times of great price speculation and of concern. With less Bitcoin distributed, the expectation is that demand for it will increase. However, the question of when is critical as the mining ecosystem must also adjust to the reduction in block rewards:

Are miners able to bear through a 50% cut in profitability if the halvening is priced in a few months after?

If not, will a significant majority of the hashrate disappear? How will that affect blocktimes?

Will this lead to a Bitcoin mining death spiral where “Bitcoin prices drop materially, eventually marginally profitable miners shut off, ad infinitum, until all the miners are gone and no one mines Bitcoin”?

Let’s examine Bitcoin’s past two halvenings to answer these questions and see how they have impacted Bitcoin’s hashrate security.

The First Halvening