By Nesir Muradov
On Sep 12, 2020
Bitcoin mining is the operation of generating bitcoins(BTC). This concept appears in almost every article we read about Bitcoin. Therefore, many questions arise on this subject.
We hope you will find answers to all these questions in this article. Before that, if you want to understand Bitcoin mining, it would be helpful to first learn a little about blockchain, the technology behind bitcoin, by reading our articles about it.
In the financial system, we are used to the money in circulation printed through the central bank. Have you ever thought, Bitcoin(BTC) – the digital currency which changes the whole financial system we know before, where does it come from in the first place? So, in this place, the concept of bitcoin mining appears. Bitcoin mining is a process that enables the production of new bitcoins.
This process is called mining because bitcoins are limited in the blockchain just like precious gemstones such as diamonds or emeralds are scarce on earth.
Miners are adding verified transactions to Bitcoin’s public ledger called the Blockchain. Then they complete the entire legitimate records in a block and add it to the chain. For this, they use special software and computers to solve difficult math problems. Some call it a puzzle. In return for their effort, the blockchain system rewards the first miner for solving this challenging problem with newly created bitcoins(BTC). The prospects of winning new bitcoins encourage people to become a Bitcoin miner.
Along with adding new Bitcoins(BTC) to circulation, miners are also like the auditors of the Blockchain system. They are individuals with specialized high performing computers, and they ensure that every transaction on the blockchain network is valid. Miners prevent coins from double-spending. In short, they secure the bitcoin network by verifying bitcoin transactions. These algorithms, which ensure the safety and security of the Bitcoin network, are collectively known as Proof of Work.
Anyone can be a Bitcoin miner, but if you want to make money from that, you have to consider, this is a time-consuming process and requires tremendous computing power.
The precise nature of bitcoin mining ensures that its supplies are always limited, and it becomes increasingly hard to produce new bitcoin. So, it was easy to generate more bitcoins in a single moment when it was not that popular among people, and there was no need for special bitcoin mining hardware. The higher the number of miners, the more difficult the puzzle, and the harder it is to earn new coins.
Every year the number of Bitcoins earned from Bitcoin mining is halving. That means if completing one block in 2009 would make miners 50BTC, this figure dropped to 25BTC in 2012. Currently, they earn 6.25BTC from mining. But it should not be forgotten that the value of Bitcoins in the market continues to increase with each passing year. The fewer bitcoins that made, the more valuable those in presence are.
The maximum amount of Bitcoin(BTC) that bitcoin miners can generate on the blockchain is 21 million. Currently, the 18.5 millionths of 21 million bitcoins that will ever exist have been “mined,” this leaves less than 3 million Bitcoins for mining. It is estimated that the last bitcoin will be mined around 2040.