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How are Bitcoins created? A simple explanation of the mining process and rewards
Updated April 2025
Introduction: Do Bitcoins Come From Nothing?
When some people hear about Bitcoin, they wonder: Where do these digital currencies come from? Are they created from nothing? The truth is that the process of creating Bitcoin is neither random nor simple. Rather, it is subject to a precise technical system devised by the currency's anonymous founder, Satoshi Nakamoto. This system is known as "mining." In this article, we will explain in detail how Bitcoin is created, why mining is important, what rewards miners receive, and what the future of this process will be until 2140.
What is mining? How does it work?
Mining is the only way new Bitcoins are produced. It is somewhat similar to extracting gold, except instead of digging, computing power is used to solve complex mathematical problems.
Mining is carried out through a network called the "blockchain." This network is a massive database distributed around the world, where all Bitcoin transactions are stored securely and organized. Transactions are collected into "blocks," and when a block is filled with transactions, it is closed and added to the blockchain.
Who Verifies Transactions?
The people responsible for verifying transactions and adding them to the blockchain are "miners." They use powerful computers to solve complex algorithms to verify transactions. The first person to solve the problem adds the new block and receives a reward.
What are miner rewards? And why do they invest their money in mining?
Mining consumes enormous amounts of electricity and requires expensive equipment. So, why do miners do all this? The simple answer lies in the rewards:
1. Block reward: Miners receive a set number of new Bitcoins for each block added.
2. Transaction fees: Miners receive the fees paid by users to process their transactions.
This block reward is known as the "Block Reward," and it is the primary means of generating new Bitcoins.
The Limited Number of Bitcoins: Why Only 21 Million?
One of the things that distinguishes Bitcoin from traditional currencies is its limited supply. Satoshi Nakamoto set a maximum number of Bitcoins at 21 million units. The reason for this limit is to prevent inflation, as the abundance of any commodity reduces its value.
For example, when central banks print more currency, its purchasing power decreases. To avoid this fate, Bitcoin was designed to be scarce, thus retaining its value over time.
Evolution of Mining Rewards Over the Years
By design, the block reward is halved every 210,000 blocks mined, roughly every four years. Let's review the stages that block rewards have gone through since the beginning of Bitcoin mining:
January 2009: Mining began, and the reward was 50 Bitcoins per block.
November 2012: After mining 210,000 blocks, the reward was reduced to 25 bitcoins.
July 2016: The reward was reduced again to 12.5 bitcoins.
May 2020: The reward became 6.25 bitcoins.
April 2024: The last halving occurred, and the reward was reduced to only 3.125 bitcoins per block mined.
How many Bitcoins are currently in existence?
As of April 2025, approximately 19.687 million Bitcoins have been mined, representing approximately 94% of the total supply (21 million). This means that the remaining Bitcoins are relatively small, increasing their scarcity in the future.
When will the last Bitcoin be mined? And what happens next?
Based on the current system, the last Bitcoin is expected to be mined in May 2140. At that point, the block reward will be zero. Miners will no longer receive new Bitcoins, and their income will depend entirely on the transaction fees paid by users.
It is believed that these fees will be sufficient to encourage miners to continue, especially since the Bitcoin network will be widely used globally by then.
Why is a block reward reduction a good thing?
While a block reward reduction may seem like bad news for miners, it increases the scarcity of the currency and, therefore, may drive up its price. When the supply of Bitcoin decreases, demand for it increases, increasing its value. This offsets the decrease in the number of coins mined.
Fees as a Future Incentive
As block rewards decrease over time, transaction fees will become the primary source of income for miners. If the Bitcoin network becomes widely used in the future, the amount of fees generated daily will be sufficient to maintain the network's continuity.
Conclusion: Mining is the Backbone of Bitcoin
Mining is not just a means of producing new coins; it is the fundamental mechanism that ensures the security of the Bitcoin network, prevents counterfeiting, and confirms the validity of transactions. Through a precise and balanced system based on scarcity, rewards, and the reduction of quantity over time, Bitcoin has succeeded in creating a unique economic system similar to digital gold.
Whether you're an investor or a technology enthusiast, understanding how Bitcoin works gives you a deeper insight into the future of digital money.