After 2140, no new bitcoins will be issued.īitcoin miners also earn fees from transactions. Based on this formula, bitcoin mining rewards decrease exponentially until approximately the year 2140, when all bitcoin (20.99999998 million) will have been issued. It will halve again to 12.5 bitcoin per block sometime in 2016. It started at 50 bitcoin per block in January of 2009 and halved to 25 bitcoin per block in November of 2012. The amount of newly created bitcoin a miner can add to a block decreases approximately every four years (or precisely every 210,000 blocks). Bitcoin’s money supply is created through mining, similar to how a central bank issues new money by printing bank notes. The process of new coin generation is called mining because the reward is designed to simulate diminishing returns, just like mining for precious metals. The competition to solve the proof-of-work algorithm to earn reward and the right to record transactions on the blockchain is the basis for bitcoin’s security model. The solution to the problem, called the proof of work, is included in the new block and acts as proof that the miner expended significant computing effort.

To earn this reward, the miners compete to solve a difficult mathematical problem based on a cryptographic hash algorithm. Miners receive two types of rewards for mining: new coins created with each new block, and transaction fees from all the transactions included in the block. Transactions that become part of a block and added to the blockchain are considered “confirmed,” which allows the new owners of bitcoin to spend the bitcoin they received in those transactions. A new block, containing transactions that occurred since the last block, is “mined” every 10 minutes, thereby adding those transactions to the blockchain. Miners validate new transactions and record them on the global ledger. Miners provide processing power to the bitcoin network in exchange for the opportunity to be rewarded bitcoin. Mining also serves to secure the bitcoin system against fraudulent transactions or transactions spending the same amount of bitcoin more than once, known as a double-spend. Mining is the process by which new bitcoin is added to the money supply.

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