Bitcoin doesn’t have a central government that decides when money is printed so it relies on miners using Bitcoin mining software to solve math problems to generate them. When a miner solves the algorithm they are awarded a block reward. The current block reward as of this writing is 12 coins. When Bitcoin was first released, miners were receiving 50 Bitcoins per block, every 4 years the block reward cuts in half. Not only is this a smart way to issue the currency, but it also encourages more people to mine for Bitcoins.
What is Bitcoin Mining and How Does it Work?
Bitcoin mining is the process of calculating an algorithm in order to solve an equation so you can receive a block reward (Bitcoins). At first, mining was done with a CPU but after the difficulty rate went up, at some point, CPU’s were not powerful enough to mine alone so software was developed in order to use GPU processors to mine Bitcoin. Technology advanced even further and machines were build specifically for mining, they even invented a chip called the ASIC. Now, there are many different types of cryptocurrency miners out here.
There are 2 types of systems created. One is Proof of Work (POW) where the reward depends on how much work the miner does. Proof of Stake (POS) is a system where it depends on how many coins they hold in their wallet. Many coin developers have adopted the POS system due to lack of security in the POW system but it is difficult to develop a community around the coin with POS solely, so some have implemented a mixture of both POS and POW systems.
The system was designed so that it gets harder and harder to mine as more and more coins are mined, the Bitcoin network automatically adjusts the difficulty. In the beginning, with the low difficulty, you were able to find blocks very easily. Over time, as more and more coins are mined, the difficulty goes up to a point that the smaller miners can no longer run their miners and make a profit as it ends up costing them more in electricity cost than profits from mining.
There will be a total of 21 million Bitcoins mined and at the current rate of mining, the last one will be mined in 2140. Today, the difficulty is up so high that unless you own a huge mining farm with 100’s or even 1000’s of machines running, you most likely aren’t making a profit. Unless of course you aren’t paying for electricity then you could still make a profit. Just Google “Bitcoin mining farms” to see some of the mining farms out there.
Safety of Bitcoin Mining
People who mine Bitcoins are also required to approve transactions. So the more miners there are, the more secure the transactions will be, and the safer the process is as a whole. The mining process is critical for the Bitcoin network in order to ensure stability, safety, security and fairness.
How to Get Started
If you want to mine Bitcoin or other cryptocurrencies, you need to dedicate a lot of time to researching which coins are most profitable. You’ll need to at least invest in a Bitcoin mining machine or high performance pc (i7 or higher) to help you solve the algorithms. Keep in mind the power it cost to run the machine. Most people are finding it not so feasible anymore to mine anymore. But there are some coins out there worth mining still.
Another thing to look in to is joining a Bitcoin mining pool. This is where a group of miners join together to solve the algorithms in a pool. The amount of Bitcoin you earn are dependent on the amount of work you put into solving the algorithms. So the amount you earn may be a little less, but you will also spend less time finding blocks. Overall, be sure to choose a profitable coin to mine and consider the power it will cost you to run the miner.
I have created some easy mining guides to get you started mining cryptocurrencies quickly.