Step 6 / The Bitcoin Machine
The Bitcoin halving.
The halving changes new bitcoin per block. It does not halve the bitcoin you already own.
Suppose Maya has 0.2 BTC when a halving happens. She makes no payment. She still has 0.2 BTC afterward; the rule does not cut it to 0.1.
The amount that halves is the maximum new bitcoin a valid block can create. That is the block subsidy. Follow that amount separately from existing holdings, fees, and the market price.
Follow the new part of a miner’s reward
A miner proposes a block of transactions and supplies proof of work. Other participants check that the block follows the rules. The miner can claim the allowed reward only within those rules.
The reward has two parts. One is newly issued bitcoin, called the block subsidy. The other is transaction fees paid from bitcoin that already exists.
Under Bitcoin’s rules, the maximum subsidy is cut in half every 210,000 blocks. It began at 50 BTC per block. Dividing by two gave 25; another halving gave 12.5; then 6.25; then 3.125.
This happens roughly every four years. The rule counts blocks, not dates on a calendar. Because blocks do not arrive at fixed times, the calendar date of a future halving is an estimate.
maximum new subsidy per block
Era 1 of this illustration: existing coins do not halve. Transaction fees are separate from the subsidy.
The bitcoin already held stays the same
The halving changes how much new bitcoin can be created in a block. It does not halve Maya’s 0.2 BTC. It also does not halve transaction fees, which remain a separate part of the miner’s permitted reward.
As the allowed subsidy keeps shrinking, the schedule approaches total issuance of about 21 million bitcoin under the current rules. People can inspect that schedule and plan around it.
One bitcoin is divisible into 100 million sats. Splitting a bitcoin into smaller units makes smaller payments possible. It does not create more total bitcoin, just as dividing an amount into smaller parts does not increase the whole.
Keep block counts and calendar estimates separate. The rule uses the number of blocks, often called block height. Uneven arrival times affect the expected date, not the number of blocks between scheduled halvings.
A small supply still needs willing buyers
Imagine a new token advertises a tiny supply. That tells you how many units are supposed to exist. It does not tell you whether anyone wants them or what a buyer will pay.
Remember the whole money report card. Usefulness and acceptance matter too. So does liquidity: how readily the asset can be traded. A supply limit does not create willing buyers or a useful market on its own.
Bitcoin’s issuance schedule likewise does not determine its price. Demand and market conditions still matter. We will study market direction and the evidence behind investment decisions later in the course.
Nodes check the amount a miner claims
A full node checks the allowed subsidy and the included fees. If a miner claims more than allowed, an unchanged node rejects the block. A passing proof of work does not fix an excessive reward.
The limit is a rule in the software participants choose to run. It is not approved by a fresh network-wide vote for each block. One person changing their code cannot make everyone else accept the change.
The idea to keep
The sequence 50, 25, 12.5, 6.25, and 3.125 tracks successive new-subsidy amounts per block. A halving does not cut existing holdings or fees. The schedule also does not decide what a buyer will pay.
Now bring the payment story together. The aim is to explain why each part exists, not just recognize its name.