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…. 

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Ofir Beigel

Owner at 99 Coins ltd.
Blogger and owner of 99Bitcoins. I've been dealing with Bitcoin since the beginning of 2013 and it taught me a lesson in finance that I couldn't get anywhere else on the planet. I'm not a techie, I don't understand "Hashes" and "Protocols", I designed this website with people like myself in mind. My expertise is online marketing and I've dedicated a large portion of 99Bitcoins to Bitcoin marketing.

12 Comments

  1. Thanks again for this lesson. My question though is, how the transactions verified. What data do you look out for. how does it work?

  2. v krishna prasad on

    sir
    do you know best bitcoin investment site without any scheme so if you know genuine bitcoin investment site please inform me i am going to invest that

    • Hey, at the moment I don’t know of any legit Bitcoin investment site that is also worth your money. They all seem like scams

  3. A new channel we can buy bitcoins using Paypal, or so it claims. I’m wondering if its legitimate or another scammer. Anybody tried it yet?

    e-pincard.com

    I’m on lesson 4 of the bitcoin crashcourse you guys btw, I hate to admit but I’m enjoying the lessons. I appreciate what you guys are doing:)

  4. can you help with a stupid question? I signed up for a wallet and downloaded GUIMiner ages ago. I think it has been running behind the scenes for the last year. I now have 160 blkNNNN.dat files inmy C drive, with corresponding revNNNN.dat files in the same place.

    Is this good, is it a start, and what do I do with them now?

    thanks for your help.

    Mart

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