Bitcoin is the name that rules the Cryptocurrency market. Though Bitcoin is used as the synonym of Cryptocurrency, actually, it is a type of Cryptocurrency. There are a lot of other cryptocurrencies also present in the digital currency market.
Bitcoin has gained so much popularity that it has become the synonym of Cryptocurrency. Those, who are familiar with the world of digital currency or Cryptocurrency, have heard the term Bitcoin mining. But what is bitcoin mining?
Here we will discuss Bitcoin mining. So, you will get the answer to your question, “What is Bitcoin mining?” So, let’s head towards the main topic of what bitcoin mining is, along with the overview, benefits, and requirements.
What is Bitcoin Mining?
In order to understand the concept of Blockchain. It is a publicly distributed ledger that holds the history or data of every Bitcoin transaction. And the process of digitally adding any data of bitcoin transactions is called Bitcoin mining.
This record-keeping process needs immense computing power. In order to make sure that the network is totally secure and trustworthy, every Bitcoin miner from across the world contributes to a decentralized peer-to-peer network.
Bitcoin Mining – Overview
So, as now you get the answer to your question “What is Bitcoin Mining?”, we will get some overview about Bitcoin mining. So, let’s get started.
10 Minutes Per Block
The creator of Bitcoin, Satoshi Nakamoto, had designed the Bitcoin network in such a way that will allow for mining bitcoin every 10 minutes. And in order to maintain this time pace of 10 minutes, the difficulty of the mathematical problem that is needed to be solved will adjust automatically.
When there are more Bitcoin miners and more computing power that is trying to mine bitcoin, the difficulty of mathematical problems increases automatically. On the other hand, when there are fewer miners who are trying to mine Bitcoin, the difficulty decreases.
During the initial stages of Bitcoin mining in the early 2000s, individuals who were interested in mining Bitcoin can do that using their personal computer. And as the popularity of Bitcoin had increased, so the difficulty of the mining process also increased.
And in order to solve the more difficult mathematical problems, the miner has started using gaming computers for the job of Bitcoin mining. As the process started repeating, the difficulty increased again, and so did the computational power.
As the result of this increasing difficulty level, eventually chips and computers were created specifically for the purpose of Bitcoin mining. And in present days, efficient hardware is required for the Bitcoin mining process, along with energy efficiency and strong computing ability.
A huge amount of electricity is required in order to solve the Bitcoin algorithm and add them to the blockchain along with receiving Bitcoin. So, if the miners keep the electricity cost lower, they will be able to earn some profit, and it will be sustainable also.
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For each solved block and adding to the Blockchain, the miners are rewarded with Bitcoin. And the amount of Bitcoin that is rewarded is referred to as Block reward. For every 2,016 blocks that are mined, the block reward is designed to “halve.”
This happens every four years, and it is called the “halving” process. In May 2020, the most recent halving happened. Below are some previous scenarios.
- 2020: 6.25 BTC.
- 2016: 12.50 BTC.
- 2012: 25.00 BTC.
Why Bitcoin Mining?
In the Blockchain, a disrupting technology is offered by Bitcoin. Due to its decentralized feature, this currency can be transferred and received globally without any delays and restrictions from the government.
The miners of Bitcoin see the value that lies in decentralized Cryptocurrency. With the latest technology inventions, in order to evaluate a stream of income on the basis of the mining computers’ or rigs’ output, Bitcoin mining can be broken down.
Here are the factors of Bitcoin profitability.
For competing with the increasing demand for successful mining, miners need to have the latest hardware. After a few years, the equipment can become outdated.
The miners need hardware that is mining-specific, and this hardware is costly. The cost of the latest ASIC mining rigs is more than $1,500 per computer.
The main operating expense is power. And the electricity is being charged per kWh or kilowatt-hour. Per kWh, the profitability for mining may float between the range of $0.03 – $0.08.
Just a small shift of a few cents can make a huge difference in mining profitability. So, it is really crucial that miners are using the power at the possibly lowest cost.
The price of Bitcoin is another important factor for the miners. After correctly solving math problems, the miners get a certain amount of Bitcoin as a reward. So, the amount of Bitcoin also needs to be that much, which can bring considerable profit for them.
There is another reason behind mining Bitcoin is the potential of Bitcoin as an investment option is really high. The experts of Cryptocurrency also believe that per coin, the price of Bitcoin can reach $100,000. By the end of April 2021, the price of Bitcoin was more than $54,000.
Requirements To Begin Bitcoin Mining
In order to start Bitcoin mining, the miner needs the following things.
- Mining Pool membership.
- Competitive mining computers or rigs.
- Mining software.
- Low-cost power supply.
So, here are all the things that you should know about Bitcoin mining. Though here I have mostly talked about Bitcoin miners, you will be surprised to know that Bitcoin mining firms also exist in the market.