But where do these Bitcoins come from? – Bitcoin Mining

The second question that people often ask is But where do these bitcoins come from?  Who produces them?

First of all you need to understand unlike fiat currency like Dollars or Rupees, no central bank can issue new Bitcoins out of thin air. There is a fixed mechanism to earn bitcoin, called mining.

Bitcoin is a crypto currency which is used for peer to peer transactions. Now all these transactions are recorded in a ledger. These transactions are encrypted into numbers and digits. For the ledgers to be updated with a transaction, it needs to be first decoded. Only after a certain number of confirmations, a transaction is approved in the Bitcoin Blockchain.

A human cannot manually verify all these transactions. We need help of computational power to confirm these transactions. You may remember that there is no central authority to verify these transactions, but people who are running nodes(computers) to verify these. Bitcoin is generated as a reward for verifying these transactions.

Only 21million bitcoins can be mined/awarded in total. More than 16 million have already been mined till now.

At the starting, 50 bitcoins were awarded for each block mine. The reward is halved every 4 years. Currently only 12.5 bitcoins are awarded for each block mined.

There are many other factors involved in mining process, difficulty, hash rate etc. which effect the time period of a block mined. This is for the next time.

For now it is important to understand, that the total number of bitcoins are fixed and only by mining it can be awarded. Nobody can declare that he has generated number of bitcoins from thin air.