Beginner's Explanation


I'm interested in learning more about how bitcoin, mining, and blockchain technology work. I'm a student and don't have a strong background in computing, and I'm looking for a layman's explanation of a few basic, yet critical questions surrounding the currency and the technology behind it. I plan on sharing the results with other interested students who want to understand more about this important concept.

  1. Miners receive 25 Bitcoins every time they create a hash (is this accurate?)- where do the coins they receive come from - are they fabricated or do they already exist somewhere? What I'm trying to understand is how the supply of currency changes - are there a fixed number of Bitcoins in existence, or is currency simply "created" whenever a miner updates the blockchain? As time goes on, will the money supply expand at some rate roughly equal to the growth in transactions - is this kind of like how the supply of fiat money in most economies has grown over time?

  2. Is there a single blockchain for Bitcoin, which contains a record of all the transactions made since the first transaction? If so, does that mean that the chain will just keep getting longer and longer as more transactions are recorded? If Bitcoin increases in usage and popularity, won't the blockchain continue to grow (maybe exponentially) and will that add to the complexity of the miner's task?

  3. This may be too complex to explain to an average person like me, but how do transactions actually get coded/added to the blockchain? I know that it requires brute force computing power and is based off of cryptography, but that's really the extent of my knowledge... If I wish to transfer 100 coins to my friend, that simple transaction must be captured somehow and translated into the chain - but how is this translation performed? Is there a constantly-changing key that has to be iteratively solved for by the miners? If a person were to "look" at the blockchain (I assume this is possible) - what would it look like, just a seemingly random collection of characters?

I'll stop there, as I'm sure there aren't simple answers to these questions and I'm sure I've misused/misinterpreted terminology and how these things actually work. Many thanks to all who read my question, and special thanks to anyone who is willing to answer one or more of my questions. If there is a better forum for me to post beginner's questions like the ones above, I'd certainly like to know that as well.


Posted 2015-12-07T22:45:03.363

Reputation: 41

Question was closed 2015-12-08T17:58:48.037


Hi Robert, thanks for your interest and welcome to Bitcoin.Stackexchange. I'm on my way to bed, so I'll be brief: For 1) please check out Where do bitcoins come from and what gives them value? and How many bitcoins will there eventually be?.

– Murch – 2015-12-07T23:22:57.447

For 2) see Is there a (potential) “Blockchain size problem”, and what solutions are available?, the difficulty for miners comes from the competition with other miners, the task's difficulty is not influenced by the size of the blockchain. For 3) see What exactly is Mining?

– Murch – 2015-12-07T23:23:07.657

Actually, it would be best, if you split each of your questions to it's own post. Our format doesn't work very well, when people ask too many questions in one post. You could make about five good specific question posts from this one! ;) However, as you can see all of these topics have been asked about before. ;) Perhaps this list of frequently questions we have would be of interest to you: I am new to Bitcoin, how can I get started?

– Murch – 2015-12-07T23:24:59.467

Murch - thank you! I'm new and didn't understand how best to ask my question. I'll keep your comments in mind for the. Thank you for your suggestions - I've begun to take a look, and I think this is what my peers and I have been looking for. This is a great place for us to start. Thank you! – Robert – 2015-12-08T13:06:11.230

I'm glad you're finding our site helpful. So, here is what is going to happen: As I was trying to point out yesterday your question post has too many different topics in it. That makes it very hard for us to give complete answers and to have several good answers on each of your questions. Our procedure is to close this type of questions as too broad.

– Murch – 2015-12-08T17:52:18.383

There are already a few close votes on it, and I will put it on hold after this comment. This does not mean that we don't want your questions, rather it means that the way you are asking your questions here doesn't work well on our site. Could you please do me the favor to split them up? Just cut and paste sections of this question above into new question posts and give each a speaking title. You can ask as many questions as you want. If you want any help, I'll be in the chat for the next few hours. I'll be inviting you to join there. – Murch – 2015-12-08T17:52:45.527

1Thank you, Murch. After being on the site for a day and reading a number of other questions, I have a better sense for how things work. I'll split up my questions now as you've instructed. Thanks again! – Robert – 2015-12-08T18:02:10.110

Yay, very glad to hear that. :) – Murch – 2015-12-08T18:05:40.840



I would recommend reading 'Mastering Bitcoin: Unlocking Digital Cryptocurrencies', by Andreas M. Antonopoulos. This book answers all of the questions that you posed, and more, in a very understandable way.


Posted 2015-12-07T22:45:03.363

Reputation: 669

He said: "I'm a student and don't have a strong background in computing" so I think this book is too high level – Sebastian Xawery Wiśniowiecki – 2015-12-08T12:48:44.657

Thank you - great suggestion, and although I don't have a computer science background, this is certainly a helpful place to start. Any suggestions for other publications are gratefully accepted! – Robert – 2015-12-08T13:01:06.113

After reading the book, I disrecommend it. It reads like a raw hex dump of Bitcoin blocks and transactions, as well as dumps of command lines on how to use the official Bitcoin client. It doesn't provide much explanation of why things are designed a particular way. – Nayuki – 2015-12-08T18:22:48.803

I disagree. Yes, parts of the book are more technical and contain code, diagrams, dumps, etc. But, I found that the book contains very clear descriptions in plain English on how all aspects of the Bitcoin protocol and network work. I don't have any relation with the author or publisher, but I highly recommend this book, and 52 customer reviews on Amazon gave it an average rating of 4.7 out of 5.0. – mti2935 – 2015-12-08T18:33:03.267


  1. They are generated every 10 minutes and sent to the pool that have won and cyphered the lastest block.
  2. Yes
  3. There's a "public key cryptography" (not a native english speaker) mechanism involved

Sebastian Xawery Wiśniowiecki

Posted 2015-12-07T22:45:03.363

Reputation: 739

Thank you! With regard to #1 (where do the "mined" coins come from), is this by design so that the use of bitcoin can grow without adding significant volatility to its value as a currency? If there were only a fixed number of coins in circulation, as more people used bitcoin its value would skyrocket up. Does growing the supply of coins alongside transactions serve to stabilize the supply - and by extension - the value of a bitcoin? – Robert – 2015-12-08T13:04:31.880

Supply of coins is limited. It will hit 21 000 000 of bitcoins in infinite future. – Sebastian Xawery Wiśniowiecki – 2015-12-08T13:59:04.377

Algorytm is like that: when network achieved 10 500 000 of coins reward was divided by 2 and was 25. Now we are waiting to mine half of the rest of the bitcoins to mine and then reward will be divided by 2 next time and will be 12.5. This way number of bitcoins in circulation will never hit 21 000 000. – Sebastian Xawery Wiśniowiecki – 2015-12-08T14:02:27.677