FAQ | Bitcoin
How are new Bitcoins created?
New coins are generated by a network node each time it finds the solution to a certain calculational problem (i.e. creates a new block), for which an average solution time can be calculated. The difficulty of the problem is adjusted so that in the first 4 years of the Bitcoin network, 10,500,000 coins will be created. The amount is halved each 4 years, so it will be 5,250,000 in years 4-8, 2,625,000 in years 8-12 and so on. Thus the total number of coins will approach 21,000,000 over time.
What's the current total amount of Bitcoins in existence?
The number of blocks times the coin value of a block. The coin value is 50 bc per block for the first 210,000 blocks, 25 bc for the next 210,000 blocks, then 12.5 bc, 6.25 bc and so on.
As of October 30th 2009, there are about 26,000 blocks in the block chain, which means 26,000 * 50 bc = 1,300,000 bitcoins in existence. You can see the up-to-date number of blocks in the status bar of the Bitcoin main window.
What is a "block"?
A block is a unit which contains the information of the transactions made after the previous block, plus a transaction which assigns a new coin to the creator of the block. Blocks form a chain from the first block to the latest block. To create a new block you need to spend CPU time, which acts as an unbribable timestamp for the previous transactions. The average rate of block creation in the whole system is 6 / hour. For details, see the technical paper: Bitcoin: A Peer-to-Peer Electronic Cash System.
The block chain length is shown in the status bar of the Bitcoin main window. The number increases rapidly while your Bitcoin client is downloading the block chain from other nodes. After the downloading is finished, your node can start generating new blocks.
So your wealth is determined by the amount of CPU power you have?
No. There's a constant average rate of new Bitcoins created, and that amount is divided among the nodes by the CPU power they supply. The competition for coin creation will drive the price of electricity needed for generating a coin close to the value of the coin, so the profit margin won't be that huge. The easier way to gain a lot of wealth would be trading goods.
At the moment, though, you can generate new coins quite profitably, if you expect them to have real value in the future. If you choose to, be aware that Bitcoin is still experimental software.