Think of bitcoin as a type of accounting software that keeps track of one type of transaction. Those transactions need to be stored all over the world. To allow for computers around the world to keep up to date with other computers, the data is stored in “blocks” and transmitted to all the other bitcoin computers every 10 minutes.
From part 3, every 10 minutes 3.125 new bitcoins are added into the system. Each new “block” that is sent out for storage contains the address of the new bitcoins. The person that received the new bitcoin earned it by creating the “block” of transactions being sent around. Each bitcoin computer reads the new block, verifies it follows all the rules and then adds the block to its database. Each block is numbered and stored in sequential order, you can visually see what the blockchain looks like and watch new blocks get created.
In order to keep the limit to 21 million bitcoins total, every four years the amount of new bitcoins for each new block is cut in half. Instead of using an actual date every four years, bitcoin counts every 210,000 blocks then cuts the new bitcoins in half.
Depending on how many people are trying to create new blocks, the halving, (the term used to describe the date when the new bitcoins are cut in half) has occurred before four years. The history of people trying to create new blocks has seen an explosion of growth since 2014.
In Part 5 we will discuss how the blocks are created.
