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How much do you know about Bitcoin mining?

Creation of Bitcoins originated because of the trust between users towards virtual currency. It follows simple law of supply and demand, and when it was created, bitcoin was worth only a few cents because it was used very little. Now because of the high demand, the price of Bitcoin is unimaginable. Click here to know about біткойн.

Mining of bitcoins

To validate a Bitcoin transaction between users you need to register it in the Blockchain (Bitcoin transaction register). A cryptographic algorithmhas been programmed to maintain this Blockchain and this algorithmneeds a certain amount of power. Computer users who make their computer available to create an encrypted, tamper-proof signature on a “block of transactions” are called Bitcoin miners. In exchange for this service, and the time spent encrypting transactions, minors are rewarded with a certain number of Bitcoins. Visit this site to know about bitpay.

Thus, to create or “mine” (bitcoinmining) Bitcoins regularly, and thus validate Bitcoin exchanges between users, it is imperative that a large number of minors calculate the cryptographic signature of the Blockchain at any time.

Bitcoin creating rate

Due to the increasing difficulty of the Blockchain cryptographic algorithm, and its size, Bitcoins are created at a decreasing rate:

  • between 2009 and 2013: 50 bitcoins issued every ten minutes,
  • between 2013 and 2016: 25 bitcoins every ten minutes,
  • between 2017 and 2020: 12.5 bitcoins every ten minutes, etc.

Bitcoin: why do we talk about a speculative bubble?

At its creation, bitcoin only interested a small circle of enthusiasts. But over the years and especially since early 2017, individuals and institutional investors (investment funds, in particular) have bought heavily. Since the number of bitcoins that can be put into circulation is limited, any sharp increase in demand automatically results in a strong appreciation of their value. This further encourages purely speculative investments.

Consequence: the value of bitcoin has been multiplied by 15 between January and December 2017 with a very high volatility (the prices can vary, in one day, of +/- 20%). As this phenomenon is exceptional for a financial asset, some economists and financial players warn against the risk of a speculative bubble that can “implode”.

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