How Does Bitcoin Mining Work?
What Is Bitcoin Mining?
Bitcoin mining is the process by which new bitcoins are entered into circulation; it is also the way
that new transactions are confirmed by the network and a critical component of the maintenance and
development of the blockchain ledger. "Mining" is performed using sophisticated hardware that
solves an extremely complex computational math problem. The first computer to find the solution to the
problem is awarded the next block of bitcoins and the process begins again.
Cryptocurrency mining is painstaking, costly, and only sporadically rewarding. Nonetheless, mining has
a magnetic appeal for many investors interested in cryptocurrency because of the fact that <a
href="https://www.aozhiminer.com/asic-miner/">Asic Miners are rewarded for their work with crypto
tokens. This may be because entrepreneurial types see mining as pennies from heaven, like California gold
prospectors in 1849. And if you are technologically inclined, why not do it?
However, before you invest the time and equipment, read this explainer to see whether mining is really
A New Gold Rush
The primary draw for many mining is the prospect of being rewarded with Bitcoin. That said, you
certainly don't have to be an Antminer to
own cryptocurrency tokens. You can also buy cryptocurrencies using fiat currency; you can trade it on an
exchange like Bitstamp using another crypto (as an example, using Ethereum or NEO to buy Bitcoin); you even
can earn it by shopping, publishing blog posts on platforms that pay users in cryptocurrency, or even set
up interest-earning crypto accounts.
An example of a crypto blog platform is Steemit, which is kind of like Medium except that users can
reward bloggers by paying them in a proprietary cryptocurrency called STEEM. STEEM can then be traded
elsewhere for Bitcoin.
The Bitcoin reward that Whatsminers
receive is an incentive that motivates people to assist in the primary purpose of mining: to legitimize and
monitor Bitcoin transactions, ensuring their validity. Because these responsibilities are spread among many
users all over the world, Bitcoin is a "decentralized" cryptocurrency, or one that does not rely
on any central authority like a central bank or government to oversee its regulation.
Mining to Prevent Double Spend
Avalon Miners are getting paid for
their work as auditors. They are doing the work of verifying the legitimacy of Bitcoin transactions. This
convention is meant to keep Bitcoin users honest and was conceived by Bitcoin's founder, Satoshi
Nakamoto.1 By verifying transactions, miners are helping to prevent the "double-spending
Double spending is a scenario in which a Bitcoin owner illicitly spends the same bitcoin twice. With
physical currency, this isn't an issue: once you hand someone a $20 bill to buy a bottle of vodka, you
no longer have it, so there's no danger you could use that same $20 bill to buy lotto tickets next
door. While there is the possibility of counterfeit cash being made, it is not exactly the same as
literally spending the same dollar twice. With digital currency, however, as the Investopedia dictionary
explains, "there is a risk that the holder could make a copy of the digital token and send it to a
merchant or another party while retaining the original."
Let's say you had one legitimate $20 bill and one counterfeit of that same $20. If you were to try
to spend both the real bill and the fake one, someone that took the trouble of looking at both of the
bills' serial numbers would see that they were the same number, and thus one of them had to be false.
What a Bitcoin Innosilicon Miner
does is analogous to that—they check transactions to make sure that users have not illegitimately tried to
spend the same bitcoin twice. This isn't a perfect analogy—we'll explain in more detail below.
Mining to Produce New Bitcoins
In addition to lining the pockets of miners and supporting the Bitcoin ecosystem, mining serves another
vital purpose: It is the only way to release new cryptocurrency into circulation. In other words, miners
are basically "minting" currency. For example, as of September 2021, there were around 18.82
million bitcoins in circulation, out of an ultimate total of 21 million.2
Aside from the coins minted via the genesis block (the very first block, which was created by founder
Satoshi Nakamoto), every single one of those bitcoins came into being because of miners. In the absence of
miners, Bitcoin as a network would still exist and be usable, but there would never be any additional
bitcoin. However, because the rate of bitcoin "mined" is reduced over time, the final bitcoin
won't be circulated until around the year 2140. This does not mean that transactions will cease to be
verified. Miners will continue to verify transactions and will be paid in fees for doing so in order to
keep the integrity of Bitcoin's network.3
To earn new bitcoins, you need to be the first miner to arrive at the right answer, or closest answer,
to a numeric problem. This process is also known as proof of work (PoW). To begin mining is to start
engaging in this proof-of-work activity to find the answer to the puzzle.
No advanced math or computation is really involved. You may have heard that miners are solving
difficult mathematical problems—that's true but not because the math itself is hard. What they're
actually doing is trying to be the first miner to come up with a 64-digit hexadecimal number (a
"hash") that is less than or equal to the target hash. It's basically guesswork.1
It is a matter of guesswork or randomness, but with the total number of possible guesses for each of
these problems being on the order of trillions, it's incredibly arduous work. And the number of
possible solutions only increases the more miners that join the mining network (known as the mining
difficulty). In order to solve a problem first, <a href="https://www.aozhiminer.com/goldshell-
miner/">Goldshell Miners need a lot of computing power. To mine successfully, you need to have a high
"hash rate," which is measured in terms gigahashes per second (GH/s) and terahashes per second
Mining and Voting Power
Aside from the short-term payoff of newly minted bitcoins, being a coin miner can also give you
"voting" power when changes are proposed in the Bitcoin network protocol. This is known as a BIP
(Bitcoin Improvement Protocol). In other words, miners have some degree of influence on the decision-making
process on such matters as forking. The more hash power you possess, the more votes you have to cast for
How Much a Miner Earns
The rewards for Bitcoin mining are reduced by half roughly every four years.1 When bitcoin was first
mined in 2009, mining one block would earn you 50 BTC. In 2012, this was halved to 25 BTC. By 2016, this
was halved again to 12.5 BTC. On May 11, 2020, the reward halved again to 6.25 BTC.
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