Until few years back when bitcoin came into existence in the year 2009, such cryptos were primarily the focus of few techies who understood the dynamics of them. But as the awareness and interest in these cryptos have increased on account of mind-boggling returns to the tunes of 20 folds, increased demand for them is also one reason for a huge surge in it price.
Demand for the digital currency is not in sync with its supply- Threshold Of Bitcoin Mining Is 21 Million
Now what this means is that unlike paper currency which is kept under check by the central government who decides on its minting and distribution, bitcoins are decentralized. And this verification, validation and check in respect of bitcoins is done through bitcoin mining.
Mining is done using a special software
An algorithm or a special software is made use of by bitcoin miners who are in turn issued some bitcoins in exchange. This is how bitcoins are generated and there also may be a case when mining doesn't necessarily result in the creation of a bitcoin.
And like the precious yellow metal gold, bitcoins are in limited supply and there will ever be only 21 million bitcoins i.e these cryptos have a threshold pegged at this number. And currently it is suggested that 16 million bitcoins are already in circulation and only 5 million are left to be mined.
Bitcoin comes into circulation as miners validate the previous transactions.
Origin of bitcoin mining
In January of 2009, the process started with 50 coins and the mathematical formula results in creation of batches of new coins about every 10 minutes.
Mining can be done by anyone willing to employ computing power
In the process miners make use of open source software for validating new bitcoin transactions that are to be recorded on a public ledger known as blockchain.
Also, they need to decode the encrypted unique ID generated by the mathematical formula for adding the validated record to the blockchain. It is this blockchain that records each of the bitcoin transaction and is publicly available..
The algorithm or bitcoin formula has set the limit for its mining at 21 million that is expected to be exhausted around 2140.
And as believed by experts, bitcoin is unlikely to become a transactional tool anytime soon but would remain a store a value for some time.