How is crypto made

How is Crypto Made

Have you ever wondered where cryptocurrency comes from, How is Crypto Made, where does it come from? If it is not a physical currency and is a so-called digital currency, how is it produced? Does it really exist? A lot of people still think crypto is a scam because it is not tangible.

Some other people think crypto is blockchain. Sure, crypto uses blockchain technology, but crypto is not blockchain. Some cryptocurrencies have a limited supply, and some have an unlimited supply; why? Some are worth very little, and some, like Bitcoin, are worth a lot.

It seems like there are new cryptocurrencies appearing every day. How can this be? Can anyone make a coin? If you ask someone about cryptocurrency, they will say sure Bitcoin. But most people have no idea what it is really all about and how it really works, let alone How is Crypto Made.

Today, I will introduce you to a specific crypto project that I have a big interest in, DeFiChain. DFI is the native token of the DeFiChain, which is a blockchain dedicated to decentralized finance. I currently earn a passive income from DeFiChain. I earn DFI every day, and I stake these and compound the interest, but where do these DFI come from?

Let’s have a look at DeFiChain, and hopefully, I can answer your question How is Crypto Made?

Mining – PoW or PoS

In most cases, new coins are created when transactions are confirmed by a process known as mining. With that said, while coins like Bitcoin and Ethereum use mining, not every cryptocurrency uses mining to generate new coins, and coins can be created in some other ways.

Today I am going to show you how DFI is created on DeFiChain. DeFiChain utilizes a Proof-of-Stake (PoS) algorithm similar to Bitcoin Core’s original Proof-of-Work (PoW) mining algorithm. While DeFiChain is choosing PoS over PoW, at the same time, DeFi technology retains the best of the tested and proven technologies developed in the Bitcoin Core blockchain.

Masternodes for Staking

To run a masternode (staking node), stakers must hold a fixed amount of DFI. This amount is 20,000. Masternodes on DeFiChain participate in active transaction validations and block creations. For validating these transactions in a block, they get rewarded.

Staking cryptocurrencies explained simply.

I know it can all seem overwhelming but bear with me for a minute, and I will explain how the blockchain and the mining process work. First of all, you need to understand a little about DeFiChain to understand how crypto is made.

A Crypto Project

Literally, anyone can start a crypto project and create a coin or token. To be of any value and stand the test of time, your coin needs to have real-world use. Bitcoin is considered a store of value. ETH is the lifeblood of Ethereum. When you send ETH or use an Ethereum application, you’ll pay a small fee in ETH to use the Ethereum network. This fee is an incentive for a miner to process and verify what you’re trying to do.

Then there are a lot of coins with no use and little value.
You have probably heard of the DOGE coin. It was created as a joke, it is a Meme coin, and that is all. The only reason it has become popular recently is from Elon Musk talking about it. It also has an unlimited supply and no use. Despite its recent popularity, I doubt it will last the distance and do not consider it a good investment.

DeFiChain

& $DFI

The cryptocurrency industry is based on a simple premise: people should be fully in control of their finances. While it seems like a simple and obvious statement, the current systems are far from providing financial services that are truly under the control of the people who use them. The mission of DeFiChain is to give people (and in the future, machines and devices) seamless access to decentralized financial services.

For that purpose, we are introducing DeFiChain, a dedicated blockchain specifically for decentralized finance (DeFi) www.DeFichain.com. If you want to learn more about that project, click the link and read the white paper for all the details, but for now, I will give you some basic facts.

As you can see, 1.2 Billion DFI is the total maximum supply. Currently, there has been 711,261,261 produced. The rest will be produced as rewards over time. This is called the emission rate.

Cycle & Reduction

The new emission rate will start at 405.04 DFI on the first cycle. The cycle period is 32,690 blocks, at 30 seconds per block. Each cycle takes approximately 11 days. This new cycle starts today, 3/06/2021

Every cycle, the block reward reduces by 1.658%. The splitting of the rewards for respective incentives will be maintained at the same proportion as laid out on the schedule above.

The unused reward will be burned. Burned rewards will not be re-introduced, therefore counted towards the 1.2 billion supply cap.

Rewards proposed may be adjusted with future on-chain governance changes. However, masternode (mining) rewards are guaranteed to be 33.33% of the total block reward.

So as you can see, every block, which is approximately 30 sec, 405.04 DFI are created; this is the emission rate. It is scheduled to reduce over the next 10 years as mentioned above. At this point, DFI will have nearly reached the max supply of 1.2 Billion.

These 405.04 DFI are divided up as per the table above. At present, as you can see, most of the rewards go to Staking and DEX Liquidity mining rewards.

I will not detail the rewards here because that is another whole subject that you can read about from the links below.

Conclusion

I know this post is fairly heavy reading, especially if you are new to crypto, so I’ll try and sum it up in simple terms. The project is DeFiChain. DeFiChain has its own dedicated blockchain and its own token DFI. The project uses a network of computers (Masternodes) to confirm the transaction on the blockchain. When each block is made, rewards are given for that block.

So as long as the project keeps going, DFI will continue to be mined. DeFiChain is bringing a lot of new services to the DeFi space that gives it value. As long as people want to use these services, DFI has a use. The more demand for DFI, the higher the value of DFI becomes (currently around 3 USD), and remember there is a limited supply.

Well, I hope you got something out of this post, and now when someone asked you How is Crypto Made, you can tell them. Once you understand it all and how it works, if you invest in a good project, I do not consider it very risky . If you have any more questions about this topic, please ask below in the comments, and remember…

Be the Best you can Be

DeFi Dave


!DISCLAIMER: I am not a financial advisor. This is not financial advice. The content and material I provide on 2dsirecrypto.com is my opinion only and general in nature. Always do your own research before investing any money. You should always understand the risks involved in trading and investing and seek advice from licensed professionals before undertaking any investments of your own.

2 thoughts on “How is Crypto Made”

  1. I have often wondered how is crypto coins made and heard about the mining, but did not understand it all. This is a very technical post and I have bookmarked it so that I can come back to it to read it again. I do not quite understand what you mean by the unused reward will be burned? Are those DFi coins that are not bought by somebody?

    Who decides that 1,2 billion is the maximum amount of DFi coins that will be mined?

    1. When a coin is burned, it is destroyed. Burned coins are still counted towards max supply, so it is a good thing and makes the coin more scarce, so value increases.

      When a project is started it is decided what max supply will be, all the information should be found in the “White Paper”

      DeFiChain is an open-source community project so no 1 person has any control it is decentralized. The community votes on proposed changes. I think it is interesting the way DeFi works.

      DeFi Dave

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