How Does Bitcoin Mining Work?

[OZER]

What Is Bitcoin Mining?
Bitcoin mining is the process by which new bitcoins are entered into circulation; it is also the way that new transactions are confirmed by the network and a critical component of the maintenance and development of the blockchain ledger. "Mining" is performed using sophisticated hardware that solves an extremely complex computational math problem. The first computer to find the solution to the problem is awarded the next block of bitcoins and the process begins again.

Cryptocurrency mining is painstaking, costly, and only sporadically rewarding. Nonetheless, mining has a magnetic appeal for many investors interested in cryptocurrency because of the fact that miners are rewarded for their work with crypto tokens. This may be because entrepreneurial types see mining as pennies from heaven, like California gold prospectors in 1849. And if you are technologically inclined, why not do it?

However, before you invest the time and equipment, read this explainer to see whether mining is really for you. We will focus primarily on Bitcoin (throughout, we'll use "Bitcoin" when referring to the network or the cryptocurrency as a concept, and "bitcoin" when we're referring to a quantity of individual tokens).

A New Gold Rush
The primary draw for many mining is the prospect of being rewarded with Bitcoin. That said, you certainly don't have to be a miner to own cryptocurrency tokens. You can also buy cryptocurrencies using fiat currency; you can trade it on an exchange like Bitstamp using another crypto (as an example, using Ethereum or NEO to buy Bitcoin); you even can earn it by shopping, publishing blog posts on platforms that pay users in cryptocurrency, or even set up interest-earning crypto accounts.

An example of a crypto blog platform is Steemit, which is kind of like Medium except that users can reward bloggers by paying them in a proprietary cryptocurrency called STEEM. STEEM can then be traded elsewhere for Bitcoin.

The Bitcoin reward that miners receive is an incentive that motivates people to assist in the primary purpose of mining: to legitimize and monitor Bitcoin transactions, ensuring their validity. Because these responsibilities are spread among many users all over the world, Bitcoin is a "decentralized" cryptocurrency, or one that does not rely on any central authority like a central bank or government to oversee its regulation.

How Much a Miner Earns
The rewards for Bitcoin mining are reduced by half roughly every four years.1 When bitcoin was first mined in 2009, mining one block would earn you 50 BTC. In 2012, this was halved to 25 BTC. By 2016, this was halved again to 12.5 BTC. On May 11, 2020, the reward halved again to 6.25 BTC.

In September of 2021, the price of Bitcoin was about $45,000 per bitcoin, which means you'd have earned $281,250 (6.25 x 45,000) for completing a block.4 Not a bad incentive to solve that complex hash problem detailed above, it might seem.



What You Need to Mine Bitcoins
Although early on in Bitcoin's history individuals may have been able to compete for blocks with a regular at-home personal computer, this is no longer the case. The reason for this is that the difficulty of mining Bitcoin changes over time.

In order to ensure the smooth functioning of the blockchain and its ability to process and verify transactions, the Bitcoin network aims to have one block produced every 10 minutes or so. However, if there are one million mining rigs competing to solve the hash problem, they'll likely reach a solution faster than a scenario in which 10 mining rigs are working on the same problem. For that reason, Bitcoin is designed to evaluate and adjust the difficulty of mining every 2,016 blocks, or roughly every two weeks.1

When there is more computing power collectively working to mine for bitcoins, the difficulty level of mining increases in order to keep block production at a stable rate. Less computing power means the difficulty level decreases. At today's network size, a personal computer mining for bitcoin will almost certainly find nothing.

All of this is to say that, in order to mine competitively, miners must now invest in powerful computer equipment like a GPU (graphics processing unit) or, more realistically, an application-specific integrated circuit (ASIC). These can run from $500 to the tens of thousands. Some miners—particularly Ethereum miners—buy individual graphics cards (GPUs) as a low-cost way to cobble together mining operations.

full article https://www.investopedia.com/tech/how-does-bitcoin-mining-work/

[inflexion]

Of course they can.  They can REVERSE this at anytime.  With CONTROL of the supply, they can control the Price.  This is ALL set up to slowly choke the life out of alot of people.

[Zenyii]

Of course there is inflation now, u just printed more than 3 trillion in 2 years.

[DennisLevis]

Thank you for this !

[countrified]

Is this misleading message about inflation approved by the Biden whitehouse ?

[NightmareX91]

Can the Federal Reserve control inflation?  The Federal Reserve is causing inflation.  Stop printing money.  Biden administration needs to stop spending so much money and allow oil companies to drill.  It's not complicated.

[beak]

Who made bitcoin? How many bitcoin does the owner have? If the maker off bitcoin sold all hes bitcoin what will that do to the crypto space?

[size]

0:51: Noice  6:19: Weird pacing on bubble...

[edusenx]

AMC t the monnnnnnnnn

[nudism]

It can be but people dont want to work hard to do it

[emoedward123]

Got to love Mr. Brooks' macro questions in his opening statement ~min 33 including: Do we trust big banks more or a open source model more?

[Sou_Jhol]

F J B

[MagicLinx]

To be clear the Federal Reserve is not federal and has no reserve. They are only here to rob the american people of the value they have created.

[Darx]

The us economy is dead, these people should be ashamed of themselves for doing this to the country. They just keep printing money, more inflation is on its way.

[supervisory]

Are these people for real. Markets price the future I would have lost tonnes of gains of i had listened to these smartasses thank God i held on to my ether.