How To

How Bitcoin is Created?

New Bitcoins are created by a decentralized and a highly competitive process known as ‘mining’. In simple terms, mining refers to the processing of Bitcoin transactions by an individual or a group of miners. These miners, in turn, are rewarded with a share of Bitcoin for their respective contribution. Miners stick to the cryptographic standards and use specialized hardware when mining Bitcoins.

Bitcoin’s protocol has been designed in a way such that new Bitcoins are generated at a constant rate. This is the very reason why Bitcoin mining has become a competitive affair these days. As more and more miners have started joining the Bitcoin network, it is becoming gradually difficult for them to earn a decent profit. In order to earn a good dividend, one must invest in efficient mining devices such as ASIC. No single body or centralized authority has power over the network, nor can it influence the system to increase profit generation. Each and every Bitcoin node will discard anything which doesn’t conform to the rules of the system.

Bitcoin is generated at a predictably decreasing rate. The maximum number of Bitcoins which may be created is 21 million and the total number of BTC created every year is halved automatically over time. At the moment, miners will perhaps be sustained by various smaller transaction fees.

Bitcoin miners secure the network- without them, the system would have been susceptible to cyber onslaughts. Miners, in exchange for their processing and security services, get compensated with a transaction fee or block reward.
Every time a miner solves Bitcoin’s PoW algorithm successfully, a new “block” is created. Initially, the reward was 50 BTC for one block. This reward gets halved after the generation of every 210,000 blocks, i.e. after every 4 years. Today, the block reward has come down to 21.5 BTC. The mining difficulty ensures that the blocks are located every 10 minutes on an average.
Bitcoins compensated to miners can only be consumed. It is not possible for an individual user to bring new BTC into the supply. This is on account of Bitcoin utilizing cryptography to confirm all exchanges. The accurate digital signature will only allow the spending of Bitcoins.

Connect With Us

Recent Post

Join 100000 + IT pros on our updates