Comment: Bitcoin "Block Reward" explained

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Bitcoin "Block Reward" explained

The concept of "block reward" is a central aspect of the (somewhat) complicated bitcoin protocol.

In as simple a way as possible it is:

- the reward "miners" are allocated for findg a block
- a block is a grouping of transactions that took place in the last 10 minutes
- a miner is someone runnig an application on their pc checking for fraud (double spending mainly) amongst the new transaction he sees, if the transactions are good, they all get included into the process of hashing
- hashing is a way of encrypting/locking the last 10 minutes of transactions in the a block of clean transactions by looking for a special "key"
- a key is a sequence of digits that when you multiply with the hash of the last 10 minutes' list of clean transaction will result in a solution that starts with a whole bunch of zeros
- the number of zeros are determined by the difficulty of said block
- the difficulty is set by the protocol automatically so that regardless of how many people mine, only one miner will find a solution every 10 minutes (or thereabouts)
- the difficulty and the reward are automatically adjusted by the protocol... noone can change these rules of the protocol
- the reward has been set at 50 bitcoins every 10 minutes for the first half of all the bitcoins that are in existence: 21 million BTC in total
- once half of them are allocated (10.5 million) then the reward is halved to 25 until half of the remaining bitcoins that have not been allocated are "rewarded" (I like to say, allocated) to miners
- halving of rewards will continue until all the 21m bitcoins have been allocated (each halving will take about 4 years, and 99% of the bitcoins will have been alocated by about 2040 or so... see this graph)

Clarification: Most people use the term: "generated" instead of ALLOCATED for the bitcoins entering the bitcoin economy/system

I prefer allocation, because the reality is that when this whole thing started, ALL THE BITCOINS were GENERATED by the protocol at its inception (that is the FULL 21,000,000 bitcoins)

read more about it here:
http://bitcoinmagazine.net/block-reward-halving-a-guide/

Just plain 'Happy'about the direction the world is taking! Especially if we live to reach LEV [Longevity Escape Velocity]