KuCoin Academy Lesson 2| From Nothing to Hundreds of Billions: What Is Bitcoin? (Part 2)
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This is the second lesson we prepared for you! In part 1, we mentioned the basics of Bitcoin. Now, let’s take a closer look at Bitcoin.
Contents:
*How Are New Bitcoin Created?
*What Is Bitcoin Mining?
*What Is Bitcoin Halving?
*Bitcoin Halving’s Impact on Price?
*How to Acquire Bitcoin?
*Conclusion
1. How Are New Bitcoin Created?
The only way to create new Bitcoin is through a process called mining. By packaging transaction records to create new blocks, new BTC can then be acquired.
2. What Is Bitcoin Mining?
By Mining, participants create blocks on the blockchain. They need to solve a cryptographic puzzle with a satisfactory answer to then create a new block. A machine that specializes in this form of calculation is called a Mining rig, while those who specialize in mining are called miners. As an incentive, there is a block reward available to whoever proposes a valid block.
The reward is made up of two components: Additional transaction fees and the block subsidy. The block subsidies are the only source of new Bitcoin. For every block created, the total supply of Bitcoin will increase by a set amount of coins.
3. What Is Bitcoin Halving?
Bitcoin halving refers to the halving of the block subsidy from creating Bitcoin blocks. Bitcoin’s white paper stipulates that a “halving event” happens every 210,000 blocks. In the beginning, the block subsidy from creating one Bitcoin block was 50 BTC. The most recent halving occurred on May 12, 2020. After halving 3 times, the block subsidy for creating a block is now 6.25 BTC.
In addition, the Bitcoin will dynamically adjust mining difficulty and control the time to create a block to about 10 minutes. “Halving events” happen about once every 4 years, and at this rate, all 21 million Bitcoin will be mined by around 2140.
4. How Does Bitcoin Halving Impact Its Price?
Halving Bitcoin mining rewards actually reduces the Bitcoin supply on the market. This will increase scarcity, and judging from historical halvings that have happened, Bitcoin halving pushes Bitcoin’s price up.
On November 28, 2012, Bitcoin halved for the first time, and the mining reward dropped from 50 BTC to 25 BTC. After this halving, BTC rose from $12 in November 2012 to $1,242 in November 2013, an increase that exceeds 9,000%.
On November July 10, 2016, Bitcoin halved for the second time, and the mining reward dropped from 25 BTC to 12.5 BTC. After this second halving, the Bitcoin price reached its ATH, exceeding $19,000 on December 18, 2017. Going from $650 to $19,000 was an increase of 2,800%.
5. How Do I Acquire Bitcoin?
Only two main ways exist to quickly acquire Bitcoin. One is to mine, of course, and the other is to buy Bitcoin.
1. Mining was relatively easy when Bitcoin was in its infancy, as it could be mined with any computer. However, as the hashrate on the Bitcoin Network continued to increase, so did the mining difficulty. Specialized machines are now needed to mine Bitcoin. These specialized machines are not only expensive, but they consume a lot of power. The threshold is relatively high for ordinary investors.
2. Acquiring Bitcoin through buying on cryptocurrency exchanges, like KuCoin, is one of the most convenient ways to acquire Bitcoin.
6. Conclusion
Bitcoin is one form of paperless currency. Unlike fiat currencies, Bitcoin is not under the thumb of any central bank; the financial system it belongs to is run by thousands of computers all over the world, and anyone who feels the need to participate only needs to download the open-source software.
Now, Bitcoin is a part of people’s lives and is widely available. People use Bitcoin for a number of reasons. Many appreciate it for its permissionless nature — anyone with an Internet connection can send and receive it with no restrictions. Others value its speed and convenience in cross-border transactions, and some use it as a retirement fund. Bitcoin is changing the world, and it’s time for you to come on board.
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