Where do new Bitcoins come from?
Seriously though…
We all have that one friend who keeps bringing up “Bitcoin” at every social gathering. And to those who don’t know me that well. That’s me. I’m that guy.
But rather than being the guy who tells you how you can make money from Bitcoin, or even that guy who tries to convince you to get in on it. Most people don’t even know where Bitcoins come from. And that’s what I’m writing about today.
Just like any new piece of disruptive technology, it is important to first know how it works in order to make logical assumptions on what might happen to it in the near future.
So where do new Bitcoins come from?
When we hear people discuss Bitcoin, we often hear the word “Blockchain” tossed into the mix. And the “Block-chain” is precisely the technology that is propelling the success of Bitcoin and other Cryptocurrencies.
Blockchain — refers to a method of verifying and securing transactions of information over a network of computers (such as the internet).
For a brief explanation on the Blockchain, click here.
Maintaining the Blockchain requires the collective computing power and electricity of specialized computers known as “Miners”. This is what one looks like:
These miners are used to process and update all transactional data that occurs on the Blockchain. Meaning that any financial transactions made with Bitcoin are processed, approved, and recorded by these little mining machines.
And in exchange for a miner’s computing and electrical power, they are rewarded a new Bitcoin that is now in circulation. Every 10 minutes, a miner solves a “block” of encrypted data, and by doing so, more Bitcoin are introduced into circulation each time. Initially, each block creates 50 new Bitcoin. But after every 210,000 blocks are solved (approximately 4 years), the amount of Bitcoin created for every block will be halved. In January of 2009, the first block was mined, and since then — it has undergone 2 halving events. Currently, 12.5 Bitcoins are created per block (until the next halving in 2020).
For more on why he halving events happen, click here.
