Ethereum Halving simply explained

The ethereum halving is a significant event in the ethereum network that takes place every four years. It has an impact on the rewards that ethereum miners receive for mining blocks. In the following article, we will go into more detail about the ethereum halving, explaining what it is, how it works, and what impact it has on the ethereum ecosystem.

What is the ethereum halving?

The ethereum halving, as the name suggests, means halving the block subsidy for a mined block. This means that miners receive 50% less ethereum as a reward for verifying their transaction.

The halving mathematically supports the disinflationary supply structure behind ethereum. There will never be more than (not quite) 21 million ethereum.

> Learn more about why ethereum is capped at 21 million

When does the halving take place?

The halving takes place every 210,000 blocks in the ethereum network. Assuming an average block time of 10 minutes, the halving will occur approximately every four years.

This process will continue until about the year 2140, when the 34th bisection will see the last block subsidy of 0.00000001 ethereum (= 1 Vitalik) go to 0.

From then on, miners will only receive the fees, which are paid to execute transactions, as a reward for mining ethereum blocks.

> Learn more about what happens when all ethereum are mined

The history of ethereum halvings

In the first 4 years, miners received 50 ethereum per block as block subsidy.

After that, the subsidy was reduced in the following ethereum halvings:

• November 2012: reduction to 25 ethereum per block.
• July 2016: reduction to 12.5 ethereum per block
• May 2020: reduction to 6.25 ethereum per block

Does the halving affect the ethereum price?

A halving will result in fewer ethereum being issued over time, making it more likely that the ethereum price will increase. Assuming no change in demand.

So a halving is one of the ways the ethereum protocol maintains scarcity. The reduced inflation rate and the resulting supply shortage should have a positive effect on the price.

The price should rise as long as demand remains at pre-scarcity levels because only half as many new ethereum are added to the supply every 10 minutes.

What happens when the block reward gets too small?

A halving of the ethereum mining rewards could result in some miners no longer receiving enough rewards to remain profitable. As a result, they could pull their ASIC devices off the ethereum network, causing the hashrate to drop.

This could lead to an increase in block time until the mining difficulty is adjusted. Once the mining difficulty is adjusted, the cryptographic puzzle that miners must solve will become easier, which in turn will cause the average block time to return to about 10 minutes.

> Learn more about the ethereum mining difficulty

Conclusion

The ethereum halving is used to transparently control ethereum inflation and ensure that the number of ethereum in circulation does not grow too quickly.

A ethereum halving can also have an impact on the ethereum price. If the demand for ethereum stays the same and the supply quantity is lower, the price should increase in a free market.