In the previous chapter, we saw that miners who produce a valid block receive a reward consisting of the fees for the transactions included in the block, plus a block subsidy. However, we haven't yet explained how the amount of this subsidy is determined. The mechanism that sets and evolves this value is known as halving.

Halving is an event programmed into the Bitcoin protocol that halves the block subsidy, i.e. the maximum amount of new bitcoins that the winning miner is allowed to create with each block. It does not affect transaction fees: fees exist independently and remain determined by user activity and competition for block space.

When Bitcoin was launched in 2009, the block subsidy was set at 50 BTC for each mined block. Since then, this subsidy has been halved several times for each halving.

Halving is not triggered by a date, but by block height. It is executed every 210,000 blocks. Since Bitcoin targets an average interval of around 10 minutes per block, 210,000 blocks corresponds to roughly four years.

CAmount GetBlockSubsidy(int nHeight, const Consensus::Params& consensusParams)
{
int halvings = nHeight / consensusParams.nSubsidyHalvingInterval;
// Force block reward to zero when right shift is undefined.
if (halvings >= 64)
return 0;

CAmount nSubsidy = 50 * COIN;
// Subsidy is cut in half every 210,000 blocks which will occur approximately every 4 years.
nSubsidy >>= halvings;
return nSubsidy;
}

Thus, if we note n the number of halvings already occurred, the block subsidy in BTC can be calculated as follows:

subsidy(n) = 50 / 2^n

Here is a summary table of halvings that have already occurred, with their block height, date and the new block subsidy applicable after the event:

Halving is repeated as long as the subsidy can be expressed in the system's minimum unit: satoshi.

1 BTC = 100 000 000 sats

As the subsidy is halved, we eventually reach fractions of a bitcoin so small that they become less than 1 satoshi. At this point, it is no longer possible to create half a unit of satoshi. The creation of money through the block subsidy stops, and miners are compensated solely on the basis of transaction fees. From this point on, all bitcoins will be in circulation, and it will no longer be possible to produce new units.

The definitive end to block subsidies will come at block level 6,930,000, i.e. at the 33rd and final halving. This event is expected to take place around the year 2140, although it is impossible to give an exact date, as it will depend on the actual speed at which blocks are found between now and then.

Since the block subsidy follows a geometric sequence with a ratio of 1/2 at each halving, money creation was extremely high in Bitcoin’s early days, and then decreases very quickly. By the 7th halving, over 99% of bitcoins will have already been put into circulation. The 99% threshold is expected to be crossed between 2032 and 2036. This means that it will then take over 100 years to mine the last remaining 1% of bitcoins. While monetary inflation was very high when Bitcoin was launched, to enable widespread distribution of the currency, it is now very low and will continue to fall, until it reaches the level of a true hard currency, whose circulating supply can no longer increase.

Bitcoin's maximum monetary supply is often presented as 21 million BTC. This is a good approximation for understanding its monetary policy, but from a strictly technical point of view, the total supply will never actually reach exactly 21,000,000 bitcoins.

The main reason is mechanical. Through successive halvings, the block subsidy eventually falls below the minimum value of 1 sat, which ends issuance before reaching the exact theoretical total. As a result of this minimum granularity and the rounding rules, the total number of bitcoins created by the subsidy is slightly less than 21 million.

In addition, marginal protocol-related deviations can also add to this. For example, in rare cases, some miners may not have claimed their full subsidy, which definitively reduces the quantity of bitcoins actually issued. We can also mention the genesis block, produced by Satoshi on January 3, 2009, whose bitcoins created are not part of the UTXO set, as well as certain historical events linked to bugs, such as duplicate coinbase transaction identifiers.

Finally, we must also take into account all the bitcoins that have been destroyed or blocked:

In theory, Bitcoin's supply is therefore limited to 21 million. In practice, however, there will never actually be 21 million bitcoins in circulation.