You’ve come to the right site if you’ve ever wondered where Bitcoin comes from or what Bitcoin mining is. Unfortunately, learning about Bitcoin and other cryptocurrencies is like unlocking Pandora’s box: for every new phrase you understand, there appear to be 100 more you need to lookup. So, with the help of some of Finder’s investment experts, I put up this quick tutorial to explain what Bitcoin mining is and how it works. But, before we get started, let’s go over some Bitcoin & Bitcoin mining fundamentals.
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What are Bitcoin Fundamentals?
Bitcoin ( BTC ) is a cryptocurrency, which is a type of digital currency. Although it was designed as a faster, simpler, and less expensive alternative to using ordinary money, most individuals now purchase it as a speculative investment. Compared to traditional money, Bitcoin is unique in that a single bank or organization does not control it. On the other hand, Bitcoin is based on a decentralized, distributed ledger, which is essentially a global network of computers that keeps account of all payments and transactions.
It is extremely difficult to cheat the Bitcoin network in this way. This is because, with computers worldwide confirming identical transactions, any discrepancy would force the system to reject the transaction and cancel it. Because the data may be thought of as blocks tied together by what’s called a hashcode, in this case, a 64-digit string of letters and numbers, the Bitcoin ledger or record is termed a blockchain.
More about Bitcoin Mining and its Uses!
Bitcoin mining is the method of making new BTC or extracting them from the Bitcoin network. However, it is also the method through which the Bitcoin ledger is kept up to date. Part of the reason Bitcoin has value is that there is a finite amount of it, similar to gold.
There will never be more than 21 million Bitcoins to prevent the system from spiraling out of control, as well as a host of other highly sophisticated mathematical reasons. And, with over 18 million Bitcoins mined so far, it’s clear that it’s become a highly successful industry. Back in the day, you could mine Bitcoin on your home computer in front of the television with the correct software. However, people have set up these gigantic computer systems in the drive to mine Bitcoin as soon as possible. So, how does it function in practice?
What is the process of Bitcoin mining?
Bitcoin miners must first validate or process at least one megabyte’s worth of Bitcoin mining transactions, thereby establishing a new block of data on the Bitcoin network. This is a critical first step in maintaining the Bitcoin ledger’s integrity.
They will be eligible for a prize if they can crack a code after completing this task. The hashcode is a 64-character string of letters and numbers that links the new and old blockchains. In this case, the powerful computer systems come into play, as they are capable of crunching an enormous quantity of data in a short period of time, providing the miner in control of the system with the highest chance of gaining the right or most similar hashcode first.
Mining for a living? How?
A fresh Bitcoin ( BTC ) block is created every 10 minutes on typical these days. Therefore, the amount of Bitcoin you may earn for your hard work will decrease every four years, as the number of Bitcoin available to be mined decreases every ten minutes. For example, in 2009, mining a single block yielded roughly 50 Bitcoin. That sum was cut in half in 2012 to 25 Bitcoin. This happened again in 2016 and 2020.
Therefore the current reward for mining one block is only 6.25 Bitcoin. If you want to keep track of the halvings, I’ve included a link to an extremely nice Bitcoin clock in the description below that shows the days, hours, minutes, seconds, and blocks till the next one. It’s worth mentioning that, with millions of miners and computers attempting to break the code, it’s extremely improbable that any single miner can ever receive the whole 6.25 Bitcoin.