How are New Bitcoins Created?

Bitcoins are created from bitcoin mining (adding transactions to a public ledger). An algorithm controls mining difficulty and total coin creation (21 million).

Because coins are created and distributed via a controlled algorithm (as opposed to a central bank), the bitcoin system avoids inflation of the currency and ensures as steady flow of new coins.

FACT: Over time less and less new coins will be rewarded as mining rewards as Bitcoin goes through incremental halvings.

FACT: The mining reward system is like a lottery, many will try to crack a cryptographic puzzle to add a block of transactions by dedicating computing power to the task. Of everyone who tries, only one account will be awarded new Bitcoins.

Bitcoins are Digital Representations of Currency

Bitcoins themselves aren’t tangible things that you can hold or use in real life; they are digital representations of currency on a balance sheet (i.e. a public ledger; i.e. a blockchain).

Thus, new coins coming into existence equates to numbers being added to a balance sheet.

Once a new batch of coins is created, a record of the existence of those coins is added to the public ledger and associated with the account (i.e. a public address) that found the block and was awarded the mining reward.

Those new coins go into circulation when the entity who got the mining reward sells or uses them.

Bottomline on Where do Bitcoins come from? When a “block” is added to a “blockchain,” new Bitcoins are created. When a miner cracks an algorithm to record a block of transactions to a public ledger called a blockchain, they have a chance of being rewarded with newly minted coins. Thus, in short, Bitcoins are created via mining process, where mining is solving codes to add transactions to the public ledger (aka blockchain). This system results in a predictable fixed increase of the money supply and helps to secure the Bitcoin system (as the more people verifying the ledger and trying to add blocks, the better the chance the ledger is correct and the harder it is for one bad actor to tamper with).

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"Where Do Bitcoins Come From?" contains information about the following Cryptocurrencies:

Bitcoin (BTC)

What do you think?

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Sam on

This is nothing more than a ponzi scheme

Thomas DeMichele on

I disagree. The market price can be a little volatile to say the least. However, there is a real asset under here with a limited supply that works to store and transfer value securely with transactions recorded on a public ledger.

There is a lot of value in the total package here. Does that value line up perfectly with the price of a Bitcoin on a given day? That is a hard question to answer. However, there are a lot of arguments to be made in favor of cryptocurrency.

If you look at the supply vs. the market cap, and realize that Bitcoin is the backbone of the crypto economy, you can start to see why the current value is what it is.

Some of it might be speculation, bubbles, and ponzi like… but at its core it is miles beyond tulip futures, weather futures, or mortgage backed securities backed by subprime mortgages that are near worthless. Bitcoin has real value, those things did not. Them not having value is ultimately what caused their bubbles to burst. Not saying throw all your money into bitcoin, I am saying you should research it and try it before you knock it.

ALMA Hinton on

Don’t understand where the money comes from when people say they have made so much money and it is in their bank. Whose bank has it come out of

Thomas DeMichele on

If you sell a bitcoin for $10k usd then the buyer has a bitcoin and you have $10k USD. If you transferred it to your bank, then it is in your bank.

Andiswa Gwala on

I would like it if you provided more information

Thomas DeMichele on

You see, when a cypher punk and a traditional fiat system no longer love each other, sometimes they part ways and one of them creates a democratic and trustless payment system based on code and a fixed rule set instead of a system whose inflation is at the whim of bankers and states.

In this system those who keep the ledger are rewarded with the chance to earn newly minted coins, this is how coins get into the system.

Half joking.

Can you be more specific? Happy to answer any questions.

NOTE: In an effort to be proactive I updated this page to add more details and hopefully to make things more clear. Hope that helps.