What is Bitcoin mining?
What is Bitcoin mining? In short, the process of confirming Bitcoin transactions and recording them on the distributed ledger is called “mining”. Almost everything you need to know about Bitcoin mining is covered in our guide.
The Bitcoin mining process helps to decentralize the network’s security and create new bitcoins.
Put very simply, it works like this:
- Verified transactions are bundled into a single block.
- To get the right to add a new block to the Bitcoin blockchain, computers must solve a complicated cryptographic puzzle.
- The first computer that solves the puzzle can add the block and is rewarded with bitcoins.
The logical answer to “what is a Bitcoin miner,” then, is the person behind the computer doing the mining. Mining Bitcoin for profit is an increasingly popular way to earn money.
Bitcoin mining can be profitable, as Bitcoin miners also get fees that users pay for confirmation of their transactions.
Once a puzzle is solved and a block added to the blockchain, the miner (currently) gets a bounty of 12.5 bitcoins. The bounty is decreasing over time – it shrinks by half every 210,000 blocks. The first miners could earn 50 bitcoins per block, while in 2020 the rate will drop to 6.25 bitcoins. Bitcoin mining is not free, as you have to buy a mining rig and pay electricity bills that can be very high. You can figure out how much you can gain by using a Bitcoin mining calculator; many are available online. You can also pay a company with rigs to do it for you: for their service of mining Bitcoin, a contract is signed that makes you pay them for around two years of mining, and you receive your coins periodically, as per contract.
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