How bitcoins are created — in layman terms

Manzoor Samad
3 min readMay 20, 2021
Photo by Aleksi Räisä on Unsplash

One word: It’s a reward for the minor upon successful association of a block to the blockchain network.

One who is new to the blockchain world, the above one-word explanation looks like someone stumbled upon a math equation without knowing where to apply it.

Bitcoin is a buzzword today, but still, there is some sort of ambiguity about this novel cryptocurrency origin for a lot of people, especially non-tech folks. Before explaining how a bitcoin is created, let’s try to briefly cover the technology behind bitcoin, “The Blockchain”.Bitcoin is the first-ever application created above the technology Blockchain.

Blockchain is an open ledger database constructed as a series of “blocks” tied back to back in a sequential manner. You can assume “block” as a page in a book, where the book is the “blockchain”. I am avoiding technical terms such as distributed ledger, p2p, etc.. to avoid the discomfort in understanding the context. I will write a detailed explanation including technical aspects in another article.

A block consists of multiple bitcoin transactions grouped by a “miner” based on some criteria such as transaction fee.

Wait, let me put forward the most elemental actor in a cryptocurrency blockchain network, they are “The Miners”. They are the ones who add and verify new blocks to the blockchain. Bitcoin is a permissionless blockchain, and that implies, anyone can be part of it. So, miners can be anyone but a participant of the bitcoin network. When a miner successfully adds a block to the blockchain, he gets a reward.

That’s the “bitcoin”.

The smart and mysterious satoshi put forward the concept of miners to grow the blockchain network. In 2009, the reward was 50 bitcoins. Now it’s 6.25 bitcoins. On average, 144 bitcoins are mined per day. Which is close to 900 (144 X 6.25) Bitcoins every day. For every 210,000 blocks, the reward will be reduced to half. The maximum bitcoins rewarded is limited to 21 million. That’s another story.

Bitcoin replaced the word trust with mathematics

While in a centralized financial system, individuals have to trust an organization/government for the money they put in banks, but here in the case of bitcoin, it’s all managed by cryptography and complex mathematical functions. Signing, verifications, approvals, and everything are systems-oriented. Satoshi put forward the concept of bitcoin as a digital replacement for currency and decentralize it to create a new financial culture. There are 1000’s of cryptocurrencies available today. They are grouped by a term called “Altcoins”.

ps: The book can’t be considered as an ideal comparison for blockchain, but incorporated it for understanding purpose.

Thanks for reading. Your thoughts are appreciated!

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Manzoor Samad

Founder, A Product guy — Design, Engineering & Distribution