The process of confirming Bitcoin transactions and recording them on the distributed ledger is called “mining”.
The 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. Additionally, miners also get fees that Bitcoin 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.
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