Bitcoin is the number 1 crypto and rightfully so. In 2009 this novel technology kickstarted the cryptocurrency revolution. Ultimately, it provided a more democratic currency with a finite supply.
Many people call it gold 2.0. But, what you may not know is that it is secured by a decentralized network of computers known as miners. These computers solve complex problems to secure the network.
Although a simple concept, Bitcoin mining is key to understanding Bitcoin in its entirety. That is why in this article I will be explaining the basics of Bitcoin mining and much more.
So without further ado. Let’s jump right in.
Bitcoin mining is the process whereby computers solve complex puzzles to secure the blockchain. In essence, they validate existing transactions and verify new transactions using a decentralized network. In return, they are compensated with Bitcoin.
What is Bitcoin mining?
Bitcoin mining is the process of solving complex puzzles to secure the network. Simply put, a decentralized network of computers verifies cryptographic hashes to ensure their validity.
This information is then updated on a global ledger known as the blockchain. In most cases, specialized hardware known as mining rigs is required.
The faster the computer is, the quicker it is to validate transactions. Ultimately, this also increases the likelihood of receiving the rewards. Therefore, this bids up the hardware costs required to solve the hash.
This creates a process that is extremely energy intensive and expensive. Therefore, it is only viable in locations with cheap electricity costs.
Overall, there is a programmatically coded limit of 21 million Bitcoins that can be mined. The increase in supply will end in approximately 2140.
Bitcoin cloud mining
Bitcoin cloud mining allows users to validate and earn Bitcoin without the burden of managing hardware. In essence, bandwidth capacity is purchased from a third party.
Consequently, investors gain exposure to Bitcoin mining while not dealing with electricity costs, hosting issues, cooling, and general maintenance.
Bitcoin Mining difficulty
Bitcoin mining difficulty is a measurement of the amount of computing power it takes to validate transactions and find the correct hash. This difficulty adjusts based on the number of miners in the network.
The greater the number of miners the greater the difficulty. As mentioned previously, they compete with each other for mining rewards. Overall, the difficulty is adjusted every 2016 blocks.
How much do Bitcoin miners make?
Currently, Bitcoin miners make 6.25 Bitcoin per successful block verification. This reward is cut in half every four years. In April of 2024, this reward will be a total of 3.125 Bitcoins.
How long does it take to mine 1 Bitcoin?
All in All, 1 new bitcoin is mined every 95 seconds on the blockchain. However, on average it takes up to 30 days for one user to mine a Bitcoin.
Is Bitcoin mining profitable?
Whether Bitcoin mining is profitable depends on the location. After all, each country and region has differing electricity costs. For instance, in Kuwait, the average cost to mine 1 bitcoin in July of 2022 was $1393 with a profit of $18,362.
Whereas, for France, it cost $27,082 to mine Bitcoin with a loss of over $7,000.
Is Bitcoin mining illegal?
In the majority of western countries, bitcoin is not illegal. For instance, it is legal to mine in the United States and most of Europe. However, countries that consider it illegal include Algeria, Bangladesh, and China to name a few.
Can you mine Bitcoin for free?
In theory, users can mine bitcoin for free. After all, there are no costs to interacting with the Bitcoin blockchain. All you need is a computer and an internet connection. That being said, both hardware and electricity usually add to the overall cost considerably.
What happens to Bitcoin mining after the last Bitcoin is mined?
After the last Bitcoin is mined the entirety of mining rewards will be derived from transaction fees.
If you want to view this article in a more visual format then please check out my video below:
Overall, Bitcoin mining is essential for the security of the network. The process verifies transactions ensuring the blockchain is functioning as intended.
This requires huge amounts of energy but is ultimately a necessary sacrifice. After a decade of use and millions of transactions the mining process has allowed the network to perform as intended.
All in all, since 2012 there has been zero downtime. I hope you found this article useful and thanks for reading it.
Want to know whether Coinbase is safe? Click here to read my previous article.