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Crypto Facts: How Is A Bitcoin Made?

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Posted May 19, 2019

For the last few years, the world of cryptocurrency has been developing at a blistering pace.  Even just a short time before this occurred, most people could not have imagined an item like a Bitcoin (let alone attempting to use or invest in Bitcoins).  As the digital world continues to move forward, terms like “crypto” and “blockchain” have quickly become commonplace.   

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But even as the world becomes more familiar with digital currencies, many people interested in these items know little about how they are created and used in everyday life.  It is important to take the time to understand these entities before getting involved with investments or regular monetary transactions because there are many scams that adeptly find many innocent victims.

In this article, we will look at the basics and attempt to gain an understanding of what goes into the creation of a Bitcoin.  These are entirely new concepts for both technology and finance, so it is always a good idea to have a firm understanding of what we are actually buying or selling before getting involved with direct Bitcoin transactions.

How a Bitcoin is Minted

To begin, we must understand that Bitcoin is a virtual currency which is associated with many advantages when compared to traditional world currencies.  Many of the common restrictions that are in place for U.S. dollars, euros, Japanese yen (or any other world currency) are simply not part of the equation for anyone trading Bitcoin and other popular cryptos.

When a Bitcoin is first “born,” a number of factors immediately begin working together.  Essentially, a Bitcoin is created when a certain number of established Bitcoins are used in peer-to-peer transactions.  For example, let’s assume that Bill sends Jane a unique Bitcoin from a crypto wallet that has been established and secured.  This is the first transaction in the process, and the life-cycle of a new Bitcoin has officially begun.

Complex software programs will now bundle this initial transaction along with many other Bitcoin transactions from around the world.  This collection of Bitcoin transactions is then grouped as a “block” and is transmitted by the crypto software to a new network of server computers.  These server computers will sometimes hack outside computers.  But, when used correctly, they will serve as the verification system for each prior Bitcoin transaction.  A series of computers will then conduct individual verification processes, which establish higher levels of security that are solidified by cryptography.

After the block of Bitcoins is fully verified, each unit is added to the collective ledger that is used to record all Bitcoin transactions.  This ledger is what is commonly referred to as the Blockchain, and it is an integral part of the entire cryptocurrency system.  As you can imagine, this involves quite a long list of users and transactions.  But, thanks to a complex system of computer networks, the process can be conducted in a relatively fast, safe, and easy process that saves vast amounts of time for users.

Blockchain Network Distribution

Once this initial phase of the Bitcoin creation process is completed, the Blockchain is officially updated and distributed through the entire network.  This is important because this Blockchain data will become the information that is used for verification processes in the future.  In the past, we used to say that things were “written in stone.”  These days, we might say that things are “written in Blockchain.”

The advantages of these modern processes are clear.  If a person writes something into a stone block, it is relatively easy for another person to alter that writing.  In the case of Blockchain, cryptography prevents prior information from being altered or overwritten.  This makes the entire process much more secure than any financial transaction that was conducted in the past.

Why is Verification Used?

Many new Bitcoin users and traders are attracted to the world of cryptocurrencies because of the high level of anonymity that is offered by these assets.  But it is still critical that Bitcoin (and every other cryptocurrency) travels through a specific verification process because this is what keeps the funds secure.

Without this additional certification, it would be very easy for someone to make fake (or counterfeit) Bitcoins.  If this occurred, the world’s current Bitcoins would become valueless.  In other words, everybody that paid real money for real Bitcoins would have their entire investment stolen from them.

Birth of a Bitcoin

Once these initial phases of the Bitcoin creation process are completed, the crypto “miners” then enter into the equation.  Complex computer systems can now be used to be the first to verify these Bitcoin transactions.  When these transactions are verified, the Bitcoin miners are then rewarded for their efforts because of their efforts in maintaining the validity of the Blockchain.  In this case, the miner is rewarded with a piece (or percentage) of a brand new Bitcoin.

Since this is a complex process that requires security and effort, each portion of the system is rewarded for its individual contribution.  In reality, there are people that spend a great deal of time and effort in the process of mining for Bitcoins.  But now that the crypto-coin has moved back above $8,000 we can see that the rewards for the process can be quite handsome.

Conclusion

The world of cryptocurrency is changing rapidly and it is true that we are defining many parts of this process as we go along.  But we have already established a strong history of technical expertise in these areas, and this has added to the level of security and safety that is visible throughout the process. This is critical for everyone involved because it means that users will continue to buy and sell cryptocurrencies and that the value of a Bitcoin will remain intact.  There is no reason people should need to feel insecure or concerned about their finances, and this is why the entire Blockchain verification process must be conducted in a correct and efficient manner.

Without this, Bitcoin (and other crypto coin instruments) would likely be made illegal by many world governments.  Unfortunately, this has already been the case for several world governments, at is it clear that some part of the global financial markets is still skeptical of the use of Bitcoin and other cryptocurrencies.  However, the proper use of technology has already proven to be secure in ways that protect users from potential scams and other forms of financial hacking practices.  This is the best way to protect the security of users and allow all countries to accept the advantages of crypto assets.  For these reasons, we must use our technological resources to their best advantages and ensure that crypto transactions are safe and secure for many years to come.

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