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What Is the Bitcoin Blockchain?
The Bitcoin blockchain is a decentralised and distributed digital ledger that records all transactions made with Bitcoin. It’s like a live running list of all the Bitcoin transactions ever executed on the network.
Once a maximum number of transactions is reached they are grouped in a block with a reference to the previous block, forming a chain of blocks, known as a “blockchain.” A new block is created about every 10 min.
The blockchain is maintained by a network of nodes (computers around the world), who each have the Bitcoin software installed on them. These new transactions are broadcast to all the nodes on the network who validate them and then add them to their copy of the running ledger of Bitcoin transactions.
What Is Bitcoin Mining?
Bitcoin mining is the validation process the nodes partake in to ensure the accuracy and immutability of transactions, whilst also securing the network.
Miners compete to solve complex mathematical puzzles (proof of work). Once solved, the node then broadcasts the block back to the other nodes who only accept the new block of transactions if all transactions in it are valid.
A hash is created which links the verified block to the previous chain of blocks and the transaction history becomes publicly accessible and verifiable.
Rewards for Mining
Each time a block is verified, the Bitcoin code defines a set block reward for miners who solve the complex mathematical problem. The initial reward was 50 Bitcoins back in 2009.
Unlike traditional currencies like the USD, Bitcoin doesn’t have a central bank to ‘print’ more money. To introduce more Bitcoin into the network and motivate people to keep the system honest, incentives for miners had to be introduced.
At present, miners are rewarded with 6.25 new Bitcoin plus transaction fees for Bitcoin already in circulation. Once all the predetermined amounts of coins have entered circulation (21 million), the incentives will then transition entirely to transaction fees.
Bitcoin Supply
As mentioned above, there will always be a fixed supply of 21 million Bitcoin programmed into the code. Hence unlike USD, no additional Bitcoins can be mined (printed).
At present, approximately 19.6 million have already been mined, leaving a mere 1.3 million Bitcoins left to enter circulation.
The halving has been set for every 210,000 blocks minted or approximately every 4 years. In 2020 the block reward was 6.25 Bit coins but after April’24 it will reduce to 3.125.
By reducing block rewards, the Bitcoin halving helps to control the supply and maintain its scarcity over time.
The Bitcoin halving is an important part of Bitcoin’s design and helps to ensure the long-term stability and sustainability of the Bitcoin network.
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