What is Bitcoin Mining

Last updated on August 31st, 2016 at 02:12 pm

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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24 Comments on "What is Bitcoin Mining"

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What an incredible waste of time and energy

Bryden Coetzee
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Bryden Coetzee

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

Zsofia Elek
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Zsofia Elek

Hi Bryden, here is a more detailed guide about Bitcoin mining, I suggest reading this before rushing to a conclusion: https://99bitcoins.com/beginners-guide-to-mining/

Eddie Okoebor
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Eddie Okoebor

How do I start this Bitcoin?

Zsofia Elek
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Zsofia Elek

Hi Eddie, we have recently created a Beginner’s Guide to Bitcoin, you can sign up for it under this link: https://99bitcoins.com/subscribe-to-newsletter/ I might be useful for you.

Will Knapp
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Will Knapp

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?

thanks,

Will

eze wise
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eze wise

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.

Dane.
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Dane.

I have learn all the fundamental really apprecıate the good work cheers.

Larry M
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Larry M

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

v krishna prasad
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v krishna prasad

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

Vivian
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Vivian

I am on the 4th-day lecture. I totally enjoyed it.

Vivian
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Vivian

This is amazing. I am enjoying your lecture.