As the world gets into a frenzy around the coming Bitcoin halving – and the price of bitcoin {{BTC}} as a result – it’s important to take a moment for a reality check.

This feature is part of CoinDesk’s “Future of Bitcoin” package published to coincide with the fourth Bitcoin “halving” in April 2024.

David Bailey is chief marketing officer for Azteco.

The halving is a non-event for the vast majority of the world. At its core, it’s a simple evolution in how much the people who process bitcoin transactions get paid. All electronic payments, whether made via credit card, Venmo or the tap of a phone, require some kind of processing.

Bitcoin transactions are no exception.

On-chain bitcoin transactions are processed by the vast network of so-called “miners,” who validate and record transactions on the blockchain. To date, these miners receive two types of rewards: a block reward, paid by the bitcoin network, and a network transaction fee, also paid in bitcoin by the person making the transaction.

The coming “halving” reduces the first reward by half. There’s nothing surprising in this. Rather, the halving is a predetermined part of the system, designed to regulate the supply of new bitcoins in a predictable manner until the maximum of 21 million bitcoins have been issued. Sometime in the next century, given current trends, the block reward for processing bitcoin payments will halve until it goes toward zero.

But the result of the decrease in the block reward has a substantial impact on the second, the network transaction fee. The increase in transaction fees is a stark reminder that the supply of bitcoin is, by design, limited. Once 21 million bitcoins have been issued (as block rewards), there’s no way for anyone to create more bitcoins or alter the supply, as governments often do with their own fiat currencies. Ref