How Bitcoin Is Formed and Added to the Blockchain

Bitcoin Formation on the Blockchain

To so many people around the globe, the concept of Bitcoin and the Blockchain is still a mystery. Some struggle to envision a currency that is made up purely of mathematical algorithms. The problem is – people are not educated in digital language, and therefore cannot understand how codes and hashes can be moulded in to a currency that is worth a lot more than any other fiat currency on the earth today.

If you are honest with yourself, you might be harbouring some of the commonly asked questions in your own mind about:

  • How did Bitcoin actually get onto the Blockchain in the first place?
  • Who put it there?
  • How is it replenished?
  • And how will the projected market cap of 21 million coins ever be reached?

These are all very valid questions. If more people were privy to the basic facts around the formation of Bitcoin currency, it would be a far better received technology. It is not until people start explaining these things more simply, that Blockchain will truly be set to take over the world and provide all the advantages that a decentralised system offers.


As with any valuable resource and commodity in the world, it must be mined forth with great labour. The degree of labour determines the value of the specific commodity. The same can be said for Bitcoin. This expensive commodity is also mined, but in a different way. The mining that we are talking about is done on a digital level, with fancy computers and mining rigs developed especially to search the internet for encrypted riches in the form of codes.

Mining is a laborious affair that costs a lot of money. But remember, without the work and cost involved, the currency would truly not be worth much at all. When you study around the subject of Bitcoin enough, you will repetitively hear the term “Proof of Work”. This dictates the authenticity and labour involved in producing any block on the Blockchain. No work = no payday!

What adds to the hardship of miners is the fact that as more miners join the search for digital gold, the more difficult it is to produce sufficient ‘product’ in time. Furthermore, on average, every 4 years (or 21,000 blocks) the number of Bitcoins awarded for completing the work halves in total. In 2012, one block formation paid 50 BTC to the miner. Today, only 12.5 BTC is earned per block formation.


Miners add blocks to the Blockchain, which essentially adds currency to the network. These blocks are cryptographically formed hash codes made up of 64-digit codes. The work of the miner is basically to be an auditor that verifies each Bitcoin transaction. They ensure by their work, that each transaction is unique and that no code is copied, resulting in double spending.

The very first Bitcoins ever placed on the Blockchain were mined authentically by Satoshi Nakamoto himself (or themselves). They set the precedent to which all succeeding block additions would conform, providing a truly original and world-class transactional system that cannot be corrupted or cheated.


Miners are in search of producing an authentic 64-digit hexadecimal code that is either equal to, or less than the target hash produced by the most recent block on the network. Once they have managed to produce this, they may be in line to add the latest block to the Blockchain and claim the rewards. We say might, because the first miner to produce a suitably verifiable code and can show the proof of work for it, will be awarded the block, and all miners will now need to try and solve the hash for the next block in line. It often happens that a code from more than one mining party will be identical, but the block is awarded to the miner who completed it first and who worked hardest for it. This means that all of the work could have been administered by a miner, only to be rejected by the network.

  • Hexadecimal explained the easy way: The word route is Greek and is broken up as hexa (meaning 6) and decimal (meaning 10). It is translated to mean a number made up of 16 possible digits. Because there are only 10 digits in mathematics (0-9), the remaining units must be made up of the alphabet – namely: a, b, c, d, e, f. In Bitcoin, a 64-digit hexadecimal code refers to a 64-digit long code made up of numbers 0-9 and letters a-f.
  • Target Hash: A target hash in Bitcoin is a 256-bit encrypted code made up of 64 characters that is found at the header of the most recent block on the Bitcoin registry.

Because blocks are constantly being added to the Blockchain via mining transactions and other forms of trade, the target hashes change constantly. It is therefore up to the miner to produce multiple 32-bit ‘nonces’ (numbers only used once) as guesses that may algorithmically equate to the desired hash code. Once the correct nonce is submitted to the Blockchain and it meets the required criteria, it will create a 256-bit encrypted hash of 64 characters (create a block) and pay the miner 12.5 BTC for his, her, or their efforts.

It is a true guessing game, and as such, much heavy-handed equipment is needed to help miners process the guesses. It’s like asking a group of thousands of friends to try and guess a 64-digit number that is on your mind and then rewarding the first one who either guesses the exact number or the closest number to it, with a lesser value. How many will lose out on a consistent basis?


Either miners need to invest huge amounts of money in mining rigs that spew out multiple nonces per minute, or they need to collaborate with one another.  Mining pools are very popular these days. Here, miners pool all their resources together and split the rewards earned in respect of the amount of work they have put into the end product.


Learning facts like the ones in this article, position you well to understand and take advantage of Bitcoin technology now. The more the public learn this information, the more comfortable they will feel about trading in Bitcoin.

The knock-on effect is huge for all industries involved in the Bitcoin market, including the online gambling industry, Bitcoin retail industry, and other service markets.

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