DeutschHow are Bitcoins created? Reports of enormous profit prospects with Bitcoin investments also tempt laypersons to get started. The fact that the necessary know-how for the creation of new Bitcoin units is lacking and that there is also too little knowledge about trading overall is not an obstacle for many investors. At least on the topic of “how are Bitcoins created?” we would like to provide clarity. The first technical term that beginners encounter with Bitcoin is mining, as in “digging”. Miners are responsible for creating coins.
How Bitcoins are Created: Community Produces New Coins Itself
You won’t find a single issuer of Bitcoins in the BTC universe. So there is no central bank or anything similar, as is the case with fiat money. The aforementioned mining is often explained as a kind of dice game. The technical component is rather unimportant for prospective users. Let’s imagine two players playing with the same dice. If a 6 is rolled, a certain amount of new Bitcoins is created, for which the blockchain protocol is responsible. You also know the protocol situation from a normal computer, where the program you are using shows you a predetermined menu item (for example, individual folders) at position xy. This is also the case with the Bitcoin system.
Inventor Satoshi Nakamoto planned it this way: when a “6” is rolled, new Bitcoin addresses with a balance of 50 BTC are created. The miner receives a password – also called a private key – and thus access to the newly created stock.
Miners “Play” for Current Mining Opportunities, so to Speak
Special programs are used for mining. Ideally, this software determines a hash rate, a specific algorithm – the “hash”. This algorithm divides messages into strings. For example, a series of letters can be converted into digits. As soon as the program recognizes a string in messages in the system that meet the specified conditions, more coins are created. This mathematical process of the so-called SHA-256 algorithm is undoubtedly very complex and time-consuming, simply because many different “players” are involved. So there are many dice and many mining participants are active at the same time.
Bitcoin System Adapts Framework Conditions to Miner Activity
In pure theory, this would run the risk of an endless number of Bitcoins being created without the system being able to meet the technical requirements. But the system is/was prepared for increasing and decreasing numbers of users and “throws”. It can increase or reduce the hurdles for mining. More transactions result in higher difficulty, and vice versa, mining is easier when miners are temporarily active. In principle, the Bitcoin algorithm provides for a block creation in a ten-minute interval. In short, only one miner can be successful every ten minutes. Since the Bitcoin blockchain was created, there have already been a good 180 changes in mining difficulty.
Regular Halving of Rewards for Miners
As I said, the exact technical details are not too important for normal Bitcoin users. However, it is important to understand that the system is not statically aligned when new Bitcoins are created. This means that new creations are very unlikely in some phases. In other phases, on the other hand, the number of coins in circulation can easily increase rapidly. A lot has happened since the first cryptocurrency was created in 2009. Today, mining has become extremely difficult compared to the early days. To mine coins, miners now need “Asics”. These are special electronic devices that, as computers, search 24/7 for opportunities to find new tokens in the system. Worth knowing in this context: The number of BTC distributed as a reward is gradually decreasing. Namely at intervals of currently 210,000 blocks within the blockchain.
Founder Defined Maximum Coin Amount at the Beginning
If the reward was initially 50 Bitcoins, it is gradually halved by half in the course of so-called halvings. Following this logic, miners will only receive manageable rewards in a few years. At the turn of the year 2019/20, however, we are still in the 25 BTC phase. The next reduction is due next year. This means that the amount of new coins created is becoming smaller and smaller. In addition, the founder has limited the total amount of tokens to 21 million. Many coins are no longer available as a result of key losses. No wonder, then, that Bitcoin is increasingly being compared to naturally limited asset classes such as gold. Satoshi Nakamoto himself had already based this comparison on the development.
This orientation ultimately ensures long-term value growth for Bitcoin with increasing acceptance. Many analysts also predict comparable developments for altcoins such as Ethereum or Litecoin.
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