What is Bitcoin Mining

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You may ask yourself “where do Bitcoins come from ?”

Bitcoins aren’t printed out like traditional money, they are mined out of the system. A miner is just a person with a computer that runs a mining program on it. The reason it’s called mining is because:

  1. Just like any other natural resource, there is a finite amount of Bitcoins. So the maximum amount of Bitcoins that can be generated is 21 million. Until today over 12 million Bitcoins were mined.
  2. Just like real world mining, you need to invest energy in order to extract these Bitcoins. The miner’s computer needs to solve complex mathematical problems, and once it solves them – new Bitcoins are generated and awarded to him.

But miners don’t just generate new Bitcoins. They also use their computers to verify transactions and prevent fraud. So more miners means faster transaction verifications and less fraud. That’s why we want to compensate miners for their hard work.

When verifying a transaction the miner gets a small fee out of that transaction for his work. So Miners get paid twice – once for verifying the transactions and again when they successfully generate new Bitcoins. Sounds profitable ? Well….not so fast…

Satoshi, the guy who invented Bitcoin, wanted the number of Bitcoins that were mined each time to remain constant, no matter how many miners come aboard. That’s why the difficulty of mining increases as more miners join the network.

So if in 2009 you could mine 200 Bitcoins with your personal computer at home. In 2014 it will take you about 98 years to mine just 1…

That’s why ASIC miners were invented. Super powerful computers designed just for mining Bitcoins. But since so many miners have joined in the past few years it’s still almost impossible to mine alone. To solve this problem mining pools were invented. Groups of miners formed together to deal with the growing difficulty of Bitcoin mining. Each miner gets paid for his relative share of the work.

So that’s how Bitcoins are born, through miners…. 

Having delved into futures trading in the past, my intrigue in financial, economic, and political affairs eventually led me to a striking realization: the current debt-based fiat system is fundamentally flawed. This revelation prompted me to explore alternative avenues, including investments in gold and, since early 2013, Bitcoin. While not extensively tech-savvy, I've immersed myself in Bitcoin through dedicated study, persistent questioning, hands-on experience with ecommerce and marketing ventures, and my stint as a journalist. Writing has always been a passion of mine, and presently, I'm focused on crafting informative guides to shed light on the myriad advantages of Bitcoin, aiming to empower others to navigate the dynamic realm of digital currencies.

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27 comments on “What is Bitcoin Mining”

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  1. So, Where is bitcoin mined from? There must be a source that it is being mined from. Who said that there are only 21 million bitcoin? And why? This smells of a scam

        1. Hi theQ,

          Well, Bitcoin miners attempt to solve a mathematical problem which is only solvable through making successive random guesses. You can imagine mining like a group of people competing to guess a random number between 1 and 1 million. Whenever a correct guess is made, whoever made it wins a prize (the block reward in Bitcoin) and an extra bonus (the fees for all the transactions they get to put into that block).

          So, this mining system is known as Proof of Work because we know that the only way to find a block is to guess, and guessing takes work as one must spend time and electricity and hardware to make that correct guess. This work requirement is what prevents someone from going back in time and rewriting the record of everyone’s transactions (the blockchain) to give themselves free bitcoins, for example.

          Hope it makes better sense now?

          Technically, what miners are using their mining power to derive is a certain hash result (starting with as many zeroes as the current difficulty setting dictates) for all the info in the current block. I can explain this in more technical detail if you like but it’s not necessary to understanding the whys and wherefores of mining.

  2. Hey,

    So, If the motivation for mining and running software that manages the blockchain is reward with new bitcoins. What will happen when all 21 million bitcoins are created?

    Who will manage the blockchain once there are no more new bitcoins to reward miners with?



    1. Hey Will, once all Bitcoins are mined the miners will still receive miner fee’s from the transactions they mine so they will still have an incentive. Also, this situation you’re describing will happen only in 2140, so I’m guessing a lot will change until then 🙂

  3. its been so amazing getting real knowledge about bitcoin here [99Bitcoins}.But i was woddering after knowing about bitcoin is there any point which i can learn hoe to invest and make money practically on bitcoin?. Thank you.

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