Bitcoin halving is how the supply of the world’s largest cryptocurrency is controlled

Although who actually created Bitcoin remains a mystery, it is believed that the platform was put together in a way that would make it a deflationary currency — with purchasing power that increases over time.

With the halvings resulting in decreased mining rewards, creating new bitcoins becomes an increasingly expensive proposition. As time goes on, each coin becomes more and more valuable. This contrasts with currencies like the US dollar, which invariably lose their purchasing power over time.

Whether Bitcoin truly is a deflationary asset remains up for debate.

“If Bitcoin were accepted as payment for goods and services, it could be interpreted that way,” explains Daniel Waterloo, adjunct professor of industrial technology and management at the Illinois Institute of Technology. “However, most businesses do not accept Bitcoin as payment, so this might not be a good way to measure its deflationary value.”

Instead, Bitcoin’s value is more linked to the economy where it connects to the “real world,” such as the cost of the electricity required to mine the blocks and the willingness of people to pay for the bitcoins that are the rewards for that work, according to Waterloo. “Bitcoin is then deflationary in the sense that, over time, fewer coins are available to pay a relatively fixed electricity bill, so each coin needs to be worth more than the previous coins (before the halving event,)” he says.

Another theory for the rationale behind Bitcoin halving is that the cryptocurrency’s creator wanted to have a larger proportion of coins being generated early on to entice people to join the network as miners.