What is Bitcoin Mining?
Traditionally, money that you use in your day-to-day life will be created through a centralized banking institution. Bitcoin, however, is acquired through the rigorous process of ‘mining‘. Mining for BTC is performed by individual users via their personal computer hardware. There is no central bank or government in control of the production of BTC. This is both the greatest benefit of the crypto world and the greatest hurdle. With this being said, mining for Bitcoin and understanding how it actually works is a technical process that requires some explaining.
How Does It Work?
When you imagine Bitcoin mining, you likely consider gold diggers from the Old West. While this image may seem cartoonish to our modern sensibilities, it is actually a fairly accurate representation of the process. However, instead of digging through dirt and streams to find gold, cryptocurrency mining is performed in a digital space. Miners record transactions chronologically into something known as a ‘ledger‘. This process is integral to the success of BTC as it provides the currency with an accurate list of transactions, thus solving the ‘double-spending’ problem that has plagued digital currencies forever.
In order for someone who is mining for Bitcoin to have success, they must bypass a randomized mathematical equation. This mathematical equation must be solved by brute force and pure luck by computing something known as a ‘nonce’. A nonce is, essentially, a string of randomly generated numbers that happens to ‘unlock’ the Bitcoin hidden within the blockchain. Once the equation is solved, using Bitcoin mining software, the coins are released to the ‘winning’ miner. After the block is unlocked, the user automatically alerts the rest of the network so that work can move on to a new block.
Solving the BTC equation is incredibly difficult and thus requires immense computer power. Unless you are willing to take on the inflated bitcoin mining cost associated with new computing hardware, you’ll have trouble competing with other miners around the world. Currently, each block contains 12.5 new Bitcoins and every four years, that number is halved. At current valuation, 12.5 BTC is equivalent to roughly $57,000.
Anyone can become a Bitcoin miner so long as they have an internet connection and the appropriate computer hardware. However, with millions of users all mining for BTC at the same time, it can be hard to remain competitive. When BTC first launched in 2009, you could successfully mine for BTC from your own personal computer. Nowadays, however, there are professionals who dedicate entire data centers to mining for BTC. On average, one block with BTC is successfully mined every 10 minutes. Some have compared Bitcoin mining to winning the lottery due to the long odds that each individual miner must overcome.