Bitcoin is the first successful cryptocurrency, rising to prices above one thousand dollars before it settled to the current range of between six hundred and seven hundred dollars. But how is Bitcoin generated? The creators of Bitcoin actually came up with a really smart way. Bitcoin is generated through Bitcoin Mining. Whenever a miner ‘mines’ a block, he is rewarded with a certain amount of newly generated Bitcoins (the reward recently lowered to 12.5 Bitcoins). In this article, I will explain how Bitcoin Mining works.
What is Bitcoin Mining?
Well, to explain Bitcoin Mining, first we have to get into why it is necessary. Let’s say I want to send 1 Bitcoin to Bob. I would enter Bob’s Bitcoin wallet address into my wallet and click send. The Bitcoin would then enter Bobs wallet. The process in which the Bitcoin Blockchain processes that transaction is called mining. Miners use highly powerful computers to search the servers for transactions, and then they process it using a concept called proof of work (that will be explained next.)
What is Proof of Work?
Proof of work is how Bitcoin prevents coins from being spent more than once and validates all transactions. Basically, Bitcoin miners have to try different “hashes” (a large string of letters and numbers), until they hit the one that Bitcoin servers have set aside.
Due to the low chance of hitting this hash, even with the hundreds of thousands of miners worldwide, a hash is hit only once approximately every ten minutes. Once a hash is hit, it creates a block where all recently confirmed transactions go into to become fully verified.
Why do miners waste time and money mining?
Mining rewards are HUGE. When you hit a block you earn 12.5 newly generated Bitcoin (and that’s recently down from a mind blowing 25!). Miners also receive a small fee for each individual transaction they process. These fees are usually only a few cents, but they can add up. These days, due to competition, new and more powerful computers are released every half year or so! Miners also don’t have to do a lot of work other than setting up. While you have to be savvy enough to set up complicated mining software, once it is set up, you can let its do its thing!
Mining looks like easy money! Can I try?
Well, first of all, mining is not easy money and will not help you get rich quick. Mining computers cost about a thousand dollars each and consume a TON of electricity. Also, remember those block rewards I was talking about? You have an EXTREMELY low chance of getting one. Your competition are huge mining farms with hundreds of miners. If you still want to try mining, then here’s how to do it:
Step 1- Purchase a miner. These are easily purchasable online. I would recommend the Antminer S9 for starters. It costs about $2,000, but without it, you might as well not try.
Step 2- Once you have your computer, set it up. Plug it into a power source, and install a mining program onto it. (Don’t install additional application so all its resources go towards mining.)
Step 3- Enjoy! You will be making some Bitcoin without any additional work!
Bitcoin Mining is a creative way to both distribute Bitcoin and to get the most essential part of the network done. By rewarding miners with newly generated Bitcoins, Bitcoin is distributed fairly! Bitcoin mining is truly what helps Bitcoin survive. Today, all alt-coins copy Bitcoin’s block system (although some use proof of stake or proof of importance). Without Bitcoin mining, the whole cryptocurrency market would not exist at all!