Bitcoin Tokens – In a Nutshell
The bitcoin token was the first successfully created cryptocurrency. Unlike fiat currency, a bitcoin token is an unprinted, digital, intangible promise of value. A form of money or store of value. Despite being created on free software and on computers, it is very hard to replicate or counterfeit. Its unique properties have helped it gain such popularity and a cult based following. The network has grown tremendously since.
The blockchain based system stores the information of each transaction of each individual (node) on a chain of blocks. A tightly stacked, interconnected, interdependent and inter-related chain of blocks of information keep the network safe from predators and threats. Another part of the protection system and hacker-immunity includes a process called the Proof-of-work. This is the evidence that a computer generates that validates and explains the transactions of a user. This is represented as a code. The underlying algorithm used to obtain the code is solved by people called ‘miners’.
Miners are ledger keepers. They can also be understood as managers of a bunch of blocks. Or as librarians. Their role is synonymous to librarians because they constantly check their blocks for new updates, help in updating, record keeping and verifying data entries through technological tools. While most of the work is done by the computer itself, the librarian ensures that all users in their unit are being taken care of.
The Reward System:
As transactions increase, new data blocks are added to the chain. The composite grows bigger and bigger with each addition or subtraction of coins. According to the bitcoin reward system 12 and halve bitcoins are created as each new block is added on the network. Miners are also tipped at each transaction to keep the currency up and running. These coins are added to the wallet of the miner responsible for the block. Other than the initial coins, the volume of all circulating bitcoins was created to reward miners.
The reward for the miners is reduced after every 210,000 new blocks are created. The reward is reduced by half. This means that the number of coins generated when a new block is created goes down by half. The reward system started as 50 coins per new block. It then went down to 25 coins per block after the next 210,000. It is 12.5 currently. It will inevitably fall to 6 in a couple of years. The halving occurs every four years, approximately.
However, according to the current consensus, the bitcoin supply is limited to 21 Million bitcoins. This means that the coin could take only 64 halvings in total. After these 64 times, no bitcoins will be used as rewards for miners. And once the circulation on the network reaches saturation, no new coins will be minted. But miners will be making more money in tipping by then because of rocketed prices and rapid transactions.