For thousands of years, “mining” was the process of extracting gold or other metals from the Earth. People used pickaxes and in the most recent years combination of technologies, including heavy machinery, excavators or chemical processes.
During the latest years “mining” is also used in crypto. But what is Bitcoin mining, and how exactly does it work?
What is Bitcoin Mining
Bitcoin mining is the process of creating new Bitcoins. This is done by solving complex mathematical equations using powerful computers. These equations are known as “hash functions”, and miners try to solve them in order to get rewards in the form of newly created bitcoins.
The procedure is called “mining” because it resembles the process of extracting gold or other metals, except that no pickaxes or excavators are used. Instead, mining is done through very powerful computers that consume enormous amounts of energy. These computers are called ASICS (Application-Specific Integrated Circuits) and they are much more efficient than regular computers, offering faster processing speed for mining.
Mining and Security
Miners also play a crucial role in verifying and securing Bitcoin transactions. Every time someone sends Bitcoins to someone else, the transaction is recorded on the blockchain. Blockchain is like a public ledger that keeps track of all bitcoin transactions that take place. Miners verify these transactions and ensure the security and integrity of the blockchain by preventing fraud and attacks from hackers.
Bitcoin Mining Rewards
Every time a miner solves a mathematical equation, he gets a reward. When Bitcoin was first created, the reward for each block was 50 BTC. Due to the architecture of Bitcoin, after mining about 210.000 blocks, about every 4 years, the reward that miners earn is halved.
After the last halving, that happened on April 2024, the block reward is 3.125 BTC. As a result, many people abandon the mining process, as it becomes no longer profitable.
Final Thoughts
As mining continues and more and more bitcoins are created, the difficulty for miners increases. As the cost of equipment and electricity keeps rising while the rewards are shrinking, it’s crucial to find solutions and make mining more attractive in the future. Miners should be motivated to preserve the stability and growth of the Bitcoin ecosystem.
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