In simple terms, mining bitcoin is a voluntary process in which volunteer people called “miners” buy special devices also called “miners” and dedicate them to the Bitcoin network. What do you think is the best bitcoin mining machine?
What does “mining Bitcoin” mean? How do new Bitcoins get mined?
Where does bitcoin come from? What does the phrase “mining bitcoin” mean? How can bitcoin get mined? In this video, we are going to answer all these questions.
What does it exactly mean to mine Bitcoin?
In simple terms, mining bitcoin is a voluntary process in which volunteer people called “miners” buy special devices also called “miners” and dedicate them to the Bitcoin network. These devices are specifically designed to solve Bitcoin’s complex math problems and for doing so, they consume a huge amount of power and energy. In return for the power they consume, they earn rewards in bitcoin.
Acquiring these bitcoins is the incentive that motivates them to buy the miner devices and pay for the electricity. Therefore, both devices that solve Bitcoin’s math problems and people who buy these devices are called “miners” in the Bitcoin literature.
The mining process serves three main purposes:
- – Validating Bitcoin’s transactions
- – Securing the Bitcoin network
- – Generating the new units of bitcoin in a decentralized way
Miners are responsible for validating Bitcoin’s transactions. By the way, pay attention that no manual process exists and everything is about codes. Miners are coded in a way that can detect malicious activities and prevent them. For example, when users decide to send bitcoin and broadcast the request to the network, the miners check their wallets to see if they have enough bitcoin for this transaction. If the user doesn’t have enough bitcoin for the transaction, his/her request will not be fulfilled. Before Bitcoin, the “double-spending” problem was a huge obstacle in the way of digital currencies. Since these currencies were completely digital, any user could copy and paste a specific piece of many and use it several times. Bitcoin was the first digital currency that solved this problem.
Miners are also responsible for securing the Bitcoin network, for as we previously mentioned, they check the transactions and validate them. For a transaction to be confirmed, it must be agreed upon by 51% of the miners. This process is called “consensus” in the Bitcoin literature. You may be wondering that a user may be able to manipulate a miner’s code and change it in a way that it confirms a malicious activity. You’re right. We’re talking about codes and in the world of codes, everything is possible. But, don’t forget that by manipulating one miner device, you can’t confirm a malicious transaction. It must get confirmation from 51% of the whole network’s computational power and since we have hundreds of thousands of miners from all over the world, this seems both practically impossible and economically illogical. This is why we say miners secure the Bitcoin network.
Finally, miners are responsible for generating and distributing the new units of bitcoin. We previously mentioned that in return for buying expensive miner devices and paying for the electricity, miners obtain rewards in bitcoin. The bitcoins they receive are actually the new bitcoins that have been generated. From the beginning, 21 million units of bitcoins were coded in the Bitcoin blockchain. By the way, these bitcoins couldn’t be used and they were waiting to be mined. Each time a Bitcoin problem is solved and a block is created, a specific amount of bitcoin is given to miners as a reward. Bitcoin blocks are created every 10 minutes. Therefore, we can say that every 10 minutes, new bitcoins are generated and distributed. To prevent inflation, Bitcoin mining reward gets halved every four years, the process referred to as “halving”. At the time of writing, the Bitcoin mining reward is 6.25 bitcoins per block.
In the Bitcoin blockchain, everything is previously thought and everything is working on a systematic basis. As you have read throughout the article, the Bitcoin network is a mutual benefit organization. Bitcoin is a decentralized monetary system and it needed a way to distribute its units. If Bitcoin used a centralized organization for this purpose, its decentralized nature would get violated. On the other hand, it needed a solution to secure its completely digital network and prevent attacks like double-spending. Mining was the best and the most decentralized possible solution Bitcoin could think of. Using mining, new miners always have enough incentive to join the network and the Bitcoin network’s security is guaranteed. At the time of writing, nearly 19 million bitcoins have been mined. Considering the halving process that occurs every four years, the remaining 2 million bitcoins will be mined by 2140.