Bitcoin is the new buzzword for virtually all financial sectors worldwide. Bitcoin enabled the world of cryptocurrencies that is now prevalent. However, other people who are not tech-savvy have a hard time figuring out what bitcoin is. Furthermore, they do not understand how it is mined. If you fall into this category, worry not as this article will explain to you what exactly Bitcoin mining is in the simplest form.
Bitcoin: A Digital Currency
When you buy an item from a merchant, you receive a receipt for the purchase. This receipt is proof that you made the purchase. Both you and the merchant remain with a copy of the receipt. However, the merchant can change the details of the receipt and claim your receipt is the fake one. You have no way of proving yours is real.
With Bitcoin, every transaction lives in a public ledger that is the Blockchain. This record has complex mechanisms that prevent anyone from altering the records. This makes Bitcoin the most secure financial system in the world. But where do these Bitcoins come from anyways? Well, that is where bitcoin mining comes into play.
Bitcoin Mining Simplified
If you have been to a quarry, the heavy machinery blast rocks to get minerals and precious stones. The amount of dirt covering the minerals is huge compared to the amount of precious metals themselves. Even more significant is the amount of energy exerted into mining these precious metals.
Bitcoin mining is comparable to mining for precious stones. Bitcoin is the precious stone. Like the heavy machinery used in mining, Bitcoin also uses some unique equipment for mining. Precious metals are hidden deep underground beneath heaps of rocks. Well, Bitcoins are hidden in blocks behind complex mathematical equations called algorithms.
The miner who manages to solve the equation first gets a Bitcoin block. A block of Bitcoin contains 6.25 Bitcoins, which is roughly $396,000 at the current BTC price. The amount of Bitcoins per block also reduces by 50% every four years in an event called block halving.
The next block halving will take place in the spring of 2024. The last halving was in May 2020.
Bitcoin Mining Difficulty
After every 2,016 blocks, the difficulty of solving the complex math equation changes. The difficulty of mining increases as more and more miners join the venture. A specific amount of mining power (AKA hash power) is needed to mine a block of Bitcoin. This hash goes up and down to ensure that the average time to mine one block remains at 10 minutes.
Due to the rising difficulty of mining Bitcoin, CPUs became obsolete. Miners sell their bitcoin at higher prices to cover the mining expenses and make a profit also. Hence, as mining difficulty rises, Bitcoin’s price goes up too.
How Can I Mine Bitcoin as a Beginner?
The easiest way to begin Bitcoin mining is to, but some mining equipment from trusted merchants such as Bitmain. After that, follow this simple guide to mining Bitcoin and learn how to set up the software. After that, relax and wait for Bitcoins to start streaming in.