How is Bitcoin created
Last updated
Last updated
Bitcoin is produced through proof of work mining consensus. This process is called mining because, like mining minerals, it is a daunting process that takes alot of energy. In other words, no one is able to print free money in Bitcoin.
Bitcoin mining is the process where new bitcoin are created and entered into circulation. Mining is one of the core components that secure the bitcoin blockchain. It involves using specialized hardware, called ASICs, to perform millions of calculations per second to solve a computational puzzle. When a bitcoin is successfully mined, the miner receives a predetermined amount of bitcoin. Bitcoin mining is energy intensive and consumes alot of electricity, cooling system and computing power.
Bitcoin runs on a decentralized computer network or distributed ledger that verifies, validates and secure the network. When computers on the network verify and process transactions, new bitcoins are created, or mined. These networked computers, or miners, process the transaction in exchange for a payment in Bitcoin. It is easy to think that Bitcoin is created out of thin air, however a Bitcoin is created after heavy use of electricity and computing power.
These computers power the process called proof-of-work mining. Rather than relying on a central bank or governmental agency, Bitcoin is created, maintained, and guarded by watchdogs around the world known as miners, who prevent tampering through a complex cryptographic process and are rewarded with bitcoin for doing so.
This decentralized form of monetary network however requires an immense and ever-increasing amount of electricity, powerful computing power and cooling system. This is why there has been complaints about the energy use in Bitcoin mining and the negative impact on the environment as well nearby community due to the noise of the hardware. The Bitcoin mining industry have worked towards ensuring more than 50% of all energy used in Bitcoin mining is from renewable and sustainable energy.
The halving is an event which reduces the issuance rate of bitcoin by half every four years. Bitcoin’s issuance schedule is precisely defined by an algorithm in Bitcoin’s code. This algorithm allows a certain amount of new bitcoin to be minted in each block, as compensation for the miner of the block.
This new bitcoin is called the block subsidy, and at Bitcoin’s inception, it was 50 BTC per block. However, the subsidy is cut in half in an event called the halving, which takes place every 210,000 blocks—roughly every four years.
Can the Bitcoin network be shutdown or hacked?
Shutting down the Bitcoin network would require shutting down the entire global internet and cutting all electricity. To stop bitcoin, every Government in the world will have to successfully coordinate simultaneously to shut down the entire internet everywhere and then keep it off forever. Even in that improbable scenario, the Bitcoin network can be communicated over radio signals.
While it’s technically possible to “hack" or take over the entire Bitcoin network, doing so would cost billions of dollars and require a massive coordinated effort involving global chip manufacturers. This makes the probability of this happening unrealistic and near impossible as there is no monetary gain from hacking the network, rather billions of dollars will be spent.
The bitcoin network has an uptime of 99.9% with no downtime in the last decade. You can verify here anytime at https://bitcoinuptime.com/
