Bitcoin monetary policy

Monetary policy is a term that refers to the actions taken by a central bank or government to manage the money supply, interest rates, and overall economic stability within a country. The primary goals of monetary policy are to control inflation, maintain price stability, and foster economic growth.

Bitcoin's monetary policy is controlled by the rules built into the Bitcoin software protocol. These rules dictate how new BTC is created and distributed over time, and any proposed changes to the protocol must be approved by a majority of the network's users.

Bitcoin's monetary policy consists of two main parts: the halving and block frequency.

The Halving

The halving is an event that occurs every 210,000 blocks (approximately every four years) in which the reward for mining a block is reduced by half. This means that the rate at which new BTC is created is constantly decreasing.

Block Frequency

The block frequency is the rate at which new blocks are added to the Bitcoin blockchain. New blocks are added approximately every 10 minutes.

The block frequency helps to ensure that the Bitcoin network is secure and that transactions are processed quickly. It also helps to distribute new BTC to miners fairly.

How the Halving and Block Frequency Work Together

When Bitcoin was first launched, the block reward was 50 BTC. The first halving occurred on November 28, 2012, at block number 210,000. The block reward was reduced from 50 BTC to 25 BTC. The second halving occurred on July 9, 2016, at block number 420,000. The block reward was reduced from 25 BTC to 12.5 BTC. The third halving occurred on May 11, 2020, at block number 630,000. The block reward was reduced from 12.5 BTC to 6.25 BTC.

The next halving is expected to occur on April 24, 2024. The block reward will be reduced from 6.25 BTC to 3.125 BTC.

The total supply of BTC is limited to 21 million coins. After the last halving, the only new BTC that will be created will come from transaction fees.