This is post is taken from the Frequently Asked Questions.

When the bitcoin network was first turned on in 2009, there was no financial incentive to acquire bitcoin. In fact, a simple computer that anyone had at home was enough to “mine” hundreds of bitcoins. The cost to mine is the cost of the electricity and acquiring the hardware to do it.

Bitcoin is initially distributed through this process of mining. Approximately every 10 minutes a block is found. The block that fits a certain pattern is declared the winner and is able to add their block of transactions to the chain. Each subsequent block occurs roughly every 10 minutes and adds additional transactions to form a connected chain of blocks. The transactions are from anyone in the world interacting with the bitcoin network. The network was designed to self correct itself to ensure that over time the 10 minute per block rate is consistent. This self-correction happens through a difficulty adjustment programmed into the code and requires no human intervention. Every 2,016 blocks or roughly every 2 weeks, the difficulty will adjust to ensure that blocks come close to the 10 minute mark.

The incentive to mine is that the winner of the block is rewarded bitcoin. The first 210,000 blocks (roughly 4 years) were awarded 50 bitcoin per block. Every 210,000 blocks the network goes through what is called a halving where the block reward gets cut in half. 25 bitcoin per block, then 12.5 per block, 6.25 per block, and finally to the halving that we just experienced where each block gets rewarded 3.125 bitcoin per block. It is these halving cycles that ensures that the last bitcoin will get mined around the year 2140.

When you send bitcoin on the bitcoin network you get to choose a fee rate that you are willing to pay to get your transaction included in the next block. Miners get to pick the transactions they want to include. As bitcoin is used more and more, the cost to send the transactions will increase as people are willing to pay more for their transactions.

During high use times, the bitcoin main chain network can get fairly expensive. Additional layers are being built on top of Bitcoin that allow nearly instantaneous transactions for a fraction of the cost that still have final settlement, relying on the security of the full bitcoin network. The layer 2 that is most popular and is being developed as the language of the main payment layer for bitcoin is called Lightning. Lightning is the language by which most people will interact with bitcoin for their everyday transactions.

For information on how to use Lightning, please see the question below.