Why Was the First-ever Bitcoin Halving So Special?

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  • The fourth Bitcoin halving is set to occur this month
  • Halvings are celebrated by the community for a number of reasons
  • We look at why the first halving in 2012 remains unique

The fourth Bitcoin halving is due to take place this month, with the event celebrated more and more each time. The halving is an event that the Bitcoin community looks forward to for two reasons: firstly, it is a chance to celebrate the genius behind the design of Bitcoin, and secondly, it has historically preempted a bull market. Back in 2012, though, when the first Bitcoin halving took place, there was no Bitcoin halving history to fall back on, and it wasn’t even known if the halving was going to be successful.

In this piece, we look back at the first ever Bitcoin halving, what happened at the time, and what it led to.

What is the Bitcoin Halving?

When Bitcoin launched in January 2009, anyone mining blocks was awarded 50 per block mined, plus the transaction fees paid by those wanting to send BTC. Given that blocks were, and continue to be, mined every 10 minutes, it’s easy to see how Satoshi was able to amass the millions of BTC that he did in those early months. This was when Bitcoin mining could be conducted on a computer by simply toggling the ‘generate’ switch inside the Bitcoin Core wallet. This functionality was removed in August 2016 when mining with dedicated ASIC machines began to take over.

The Bitcoin halving takes place every 210,000 blocks (approximately every four years) and sees this reward halved each time. This is so that the amount of new BTC introduced into the market reduces over time, countering the anticipated improvements in mining hardware. This simple concept is one of the most enduring things about Bitcoin’s elegant design.

Bitcoin in 2012

The first Bitcoin halving came while Bitcoin was enduring another first: its first bear market. Bitcoin hit $30 in November 2011, which proved to be the peak of its first bull run, leading to an 82% drop in price by June 2012. Having fallen all the way down to $2 at this point, Bitcoin spent the second half of 2012 slowly recovering, with suggestions that it might not actually be dead after all.

By the time of the first Bitcoin halving in November that year, the price had recovered significantly and was sitting at $10. Despite it being the first halving, there was little sign of trepidation on Bitcointalk, the primary forum at the time. Halving parties, both physical and virtual, were being planned, with almost everyone on the messageboard fully aware of the bullishness that the halving should engender, while many looked forward to a price increase on the back of the reduced supply.

However, there were naturally butterflies being felt by some over the impact of the halving. One user suggested that there was “nervousness in the market over the expectation of the reward halving” and added that “the reward halving will cause significant reaction in the community.” There was also the impact it would have on the mining companies whose income was about to be halved to think about, with one respondent comparing it to the recent price collapse:

A lot of inefficient miners will turn off their hardware. The same inefficient miners will turn off their hardware if the price dropped to $5 USD:BTC and stayed there for a couple of weeks.  Miners turning off rigs isn’t unexpected. Those miners who turned off rigs would turn them right back on if USD:BTC went to $20 and stayed there for a couple weeks.

One user by the username of ‘thezerg’ suggested a potential pattern in terms of the value of Bitcoin before and after the halving:

So the block rate halving is more likely to affect (increase) the long term appreciation of the value of a BTC, combined with a spike leading up to the reward halving which could turn into a massive price appreciation event. And then (regardless of whether we see a small spike or a big rise), we’ll see a possible dump afterwards as short term hoarding is sold.

Halving Day

No one quite knew what to expect on November 28, 2012, as block 210,000 approached, with many unsure of the best way to actually watch events unfold. While many perpetually refreshed their Bitcoin block explorers as the time ticked over to 15:23, miners were hoping that it would be they who earned a place in Bitcoin halving history.

At 15:24, block 210,000 was produced by a miner with the Bitcointalk username of laughingbear, mining to the Slush Pool mining pool, who received the first 25 block reward. The hashrate was maintained and there were no reports of anything having gone haywire;  the halving had been a success.

With the first Bitcoin halving having gone off without a hitch and the miner of the first post-halving block being identified and congratulated, there was something else to be decided: whose Bitcoin transaction would be the first through the gate? This battle, which was a less public affair than the battle to be the first block miner, saw the transaction fees being offered to miners going through the roof as those seeking the accolade upped the ante to get their transaction through at the right time.

The winning transaction saw 0.08539756 BTC, worth $1.06 at the time, being sent from one wallet to another, with a staggering transaction fee of 7, today worth $460,000. Even at the time, this was a pretty penny to pay for the accolade of having the first post-halving transaction, but clearly it mattered to someone.

The Aftermath

The Bitcoin halving event turned out to have the exact opposite effect to what thezerg had predicted, at least in the short term. While the price of Bitcoin did indeed rise in the lead-up to the event, the halving itself actually turbo-boosted the bull market, helping Bitcoin to rocket to $230 within four months and over $1,000 within a year. It was only after this that thezerg got his price dump.

This pattern has played out with every halving since the first: the event itself takes place towards the end of a bear market, acting as a fundamental principle behind a new bull market, which tops out within the next 18 months to two years. If this pattern continues to play out, 2025 could be the year that we see Bitcoin hit the much-vaunted $100,000 figure.

The story of the first Bitcoin halving didn’t end in 2012. Five months later, the graphics card that mined block 210,000, an ATI Radeon HD 5870, was auctioned off as a piece of Bitcoin memorabilia by its owner, laughingbear.

Having offered the card to Satoshi Nakamoto for free and rejecting three claims from individuals claiming to be Bitcoin’s pseudonymous creator, laughingbear sold the card for $850, making it one of the first pieces of Bitcoin memorabilia and certainly the first halving-based one.

Watershed Moment

The story of this first-ever Bitcoin halving marks a watershed in the project’s history. ASIC miners arrived soon afterward and quickly replaced home GPU miners, thanks to their far superior power. Soon, entire mining farms sprang up, featuring hundreds and then thousands of ASICs, with the mining pools growing to gargantuan size. The efforts of individual miners were swiftly swallowed up by corporations such as Bitmain, and all quickly left the game, unable to compete.

It is for this reason that the first Bitcoin halving has a different vibe to it than all the halvings since, a time when miners were still recognized as individuals rather than billion-dollar companies, with an individual machine even able to be pinpointed as being the one that produced the first post-halving block.

Hopefully, Bitcoin has plenty more halvings in it yet, but, for those that were there, this first one will remain the most special in its history.