Bitcoin is a leading cryptocurrency in the crypto market not just because it is one of the most valuable ones but because it is the first virtual currency that has set the path for other altcoins. Also, for the most part, the success of Bitcoin and its value is affected by the way new Bitcoins are generated on the network. If you’re new to the crypto world and you’re wondering how new BTC are generated, we explained that and more in this article.
Bitcoin was created as a decentralized currency and a viable alternative to traditional payment methods; hence it is not governed or issued by a central authority. This is why the blockchain network is not only a system where BTC transactions are approved and processed but also it is so the network where at a stable rate, new BTC is being produced.
Mining is a process that has two outcomes. The first one is an approved block of BTC transactions and the second one is a new BTC. This is a competitive process through which miners are competing to solve difficult computational puzzles. The first miner that resolves the numeric puzzle gets the block reward, and new Bitcoin is generated on the network.
As we mentioned earlier, there is a stable rate at which new BTC is generated that is due to two reasons. First, there is a blockchain protocol that impacts the inflation rate of Bitcoin because this is a distributed virtual currency, and there is no governing body that regulates the supply of BTC. Moreover, this also means that it is there is a predictable time period required for a block of transactions to be processed on the network. Actually, on average, 10 minutes are required for one block of transactions to be approved on the network.
If you want to obtain a BTC, it is much easier to get it on online trading sites because you aren’t directly involved with the mining process, and you can easily buy BTC or change your position and sell Bitcoins. One great example of a high-quality and accessible exchange platform is the News Spy automated trading site.
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First, Bitcoin’s value is affected by the number of BTC that are being generated on the network, and because it is a decentralized cryptocurrency, only the relationship of the supply and demand can change the price of Bitcoin.
First, it’s important that users know that there is a limited number of BTC that can ever be generated of 21 million, and there is a protocol that not only increases the difficulty of mining but also it reduces the compensation which the miners get for working on the network.
More specifically, after 2,018 blocks are added to the network, the blockchain protocol automatically evaluates the computing power on the network, which is based on the traffic on the system, and it increases the difficulty of Bitcoin mining when the hash rate increases.
Next, Bitcoin halving is the main event that split in half the block reward that the miners receive, and this also minimizes the current influx of BTC on the network because a smaller number of miners has the incentive to mine on the network based on this reward. In other words, Bitcoin cuts in half also the number of BTC that is being produced.
Overall, this creates a situation where Bitcoin is regarded as a safe-haven asset due to its rare and totally restricted supply. As the demand is far bigger than the supply, the price of Bitcoin is on the rise.