Where Do Bitcoins Come From?

How are new bitcoins created?

Bitcoin has a finite supply, but not all units are in circulation yet. The only way to create new coins is through a process called mining – the special mechanism for adding data to the blockchain.

How many bitcoins are there?

The protocol fixes Bitcoin’s max supply at twenty-one million coins. As of 2020, just under 90% of these have been generated, but it will take over one-hundred years to produce the remaining ones. This is due to periodic events known as halvings, which gradually reduce the mining reward.

How does Bitcoin mining work?

By mining, participants add blocks to the blockchain. To do so, they must dedicate computing power to solving a cryptographic puzzle. As an incentive, there is a reward available to whoever proposes a valid block.

It’s expensive to generate a block, but cheap to check if it’s valid. If someone tries to cheat with an invalid block, the network immediately rejects it, and the miner will be unable to recoup the mining costs.

The reward – often labeled the block reward – is made up of two components: fees attached to the transactions and the block subsidy. The block subsidy is the only source of “fresh” bitcoins. With every block mined, it adds a set amount of coins to the total supply.

How long does it take to mine a block?

The protocol adjusts the difficulty of mining so that it takes approximately ten minutes to find a new block. Blocks aren’t always found exactly ten minutes after the previous one – the time taken merely fluctuates around this target.