Bitcoin, the first ever created cryptocurrency, functions as a peer-to-peer network. All the users of the Bitcoin have a share of the Bitcoin bank. But the question is, where are Bitcoins generated from? A government decides when to mint and distribute money with a paper currency. Unlike traditional currencies, Bitcoin has no regulatory authority, nation, state or central bank backing it up. Bitcoins are generated by a process known as mining. It is called mining because there are only a fixed number of Bitcoins that can ever be mined, which is capped to 21 million.
The Bitcoin miners use a specific software/hardware to find solutions to complex mathematical puzzles/problems to which, they are rewarded with a certain fixed number of Bitcoins in exchange. This mechanism allows a acute way to issue the Bitcoin and also creates an incentive for more people to mine. All the Bitcoin transactions are approved by miners, so more miners indicates a safer network. Depending on how fast the math problems are solved, the level of difficulty is automatically changed by Bitcoin network. All the Bitcoin users in the world are connected and together, they contribute to a Bitcoin network that performs operations and checks all Bitcoin transactions in a public ledger known as the block chain. This eliminates the need for a central bank as all the users together constitute the bank.
In the initial days, Bitcoins were mined using processors and computers. Soon, miners started using graphics card, or Graphics Processing Units (GPUs) which were effective and faster. Eventually, hardware known as Application Specific Integrated Chips (ASIC) was designed and programmed particularly for mining Bitcoins. These chips were faster and consumed less power. As the usage of the Bitcoin increased, more miners joined the Bitcoin network. This made it more difficult for the individuals to solve the mathematical problems. Hence, to find solutions to this problem, miners found a way to work together in pools. Pools of miners found results quicker than their individual miners. Each miner was rewarded proportionately to the amount of hashing capacity he/she provides.
The number of Bitcoins generated after mining each block is called the block reward. It is halved every 210,000 blocks or roughly every 4 years. It started with 50 in 2009 and is currently 25 since 2014. It will continue to decrease until the total number of Bitcoins reach 21 million in the next 120 years or so. Hence, Bitcoin mining is a fundamental part of how Bitcoin works. It ensures fairness, accuracy, transparency while keeping the Bitcoin ecosystem secure, safe and stable.