What is Bitcoin Mining (A Brief Guide) - Tectum Blockchain What is Bitcoin Mining (A Brief Guide) - Tectum Blockchain

What is Bitcoin Mining (A Brief Guide)

Bitcoin like any kind of currency doesn’t just start to exist, it has to come from somewhere. New Bitcoin has to come into circulation at some point, or it would become scarce, further weakening its claim as an on-demand currency. That process by which new bitcoin enters into circulation is known as mining.

To further understand how bitcoin mining works, you need to understand a concept in cryptocurrency known as proof of work

Proof of Work (PoW)

Proof of work (POW) is a mechanism for asserting the validity of crypto data. The mechanism involves solving an alphanumeric (a mixture of alphabets and numbers) computer puzzle called a hash to create new blocks in a crypto blockchain. Once the hash is solved, the computer that solves the hash presents it as proof that it has “done the work” hence the name of the mechanism. There has to be a consensus among the nodes on the blockchain that a given node that node has a POW before the blockchain can be updated to reflect the new block. The reward for a POW is new Bitcoin. The process of earning new coins with proof of work in cryptocurrency is known as mining.

Even with the  “crypto winter” that has hit the crypto industry, which has seen BTC drop more than 70% of its value,  Bitcoin remains the most popular as well as the most expensive cryptocurrency,  it is still worth around $18,000 and still expensive, mining is the only way one can get bitcoin without paying for it. For this reason, there are thousands  (if not millions) of miners who are also hoping to mine new bitcoin and get a reward.

Because of this, you need a sophisticated ASCII computer and mining gear to be able to have a chance to mine bitcoin, because the chance that you will be the first to solve the hash depends on the mining power that you have.

 

Is Bitcoin Mining Legal?

This question might look like a straight yes or no question, but it is a lot more complicated. I believe the answer that we can all settle for is “it depends on where you are”. For example, El Salvador has just adopted cryptocurrency including Bitcoin as legal tender, so mining is legal there, on the other hand, countries such as China, the Central African Republic, and other countries in Africa, Asia, and South America have banned cryptocurrency as a whole so mining is illegal in those countries, however, there are countries like the US and some parts of the EU where cryptocurrency has not been adopted as legal tender but mining is still allowed.

Part of the reason why Bitcoin mining is still facing legal issues is in the above-mentioned Proof of work. Because the machines used to mine bitcoin are high-performance, they consume a lot of energy (For example 120- 240 billion kw/h is used to mine bitcoin in a year greater than the annual usage of well-populated countries like Australia and Argentina),  mining has come under major opposition by climate change activists and ecological support groups.

Cryptocurrency mining
Cryptocurrency mining

Can you get rich mining bitcoin?   

When bitcoin mining was new, it was very lucrative, but as many more people joined the bitcoin blockchain, the process has become way more expensive, and you have to get more expensive equipment and a bigger source of power supply, which also means more expenses.

Furthermore, since the creator of the bitcoin blockchain cannot afford to flood the market with bitcoin, (or else the supply will become greater than the demand and its value will drop) each successive block reduces in value, which means the reward of the bitcoin earned bare covers the expenses of the equipment required to mine it.

However what miners are essentially doing is that they are acting as auditors to forestall the problem of double spending,

 

How much do Bitcoin miners make?

At the moment if a miner can solve a hash successfully they will make 6.25 bitcoin (about $125,000). However, the increased competitiveness of solving a hash ensures that bitcoin miners form mining guilds (much like the mining guilds of the gold rush) to increase their chances of solving the hash. If a miner within a mining network solves a hash, every member of that network who participated gets something as a reward for their work.

 

How long does it take to mine 1 bitcoin?

As noted mining bitcoin is not an easy job. There are an estimated 1.7 billion attempts to guess the correct hash of a new block and miners mine a new bitcoin block every 10 minutes. Thus in real terms, it takes extremely fast machines 10 minutes to mine 1 bitcoin. It is because of these reasons that miners often form mining networks.

 

How do you mine Bitcoin on Laptop?

In the first years of Bitcoin,  people could mine bitcoin on regular laptops, but as more people became miners and the competition became stiffer, ordinary laptops simply became too slow. Then they moved to GPUs,  specialized processors that were created to render graphics and were 100 times as fast as normal laptops but then even those became too slow as even more people become bitcoin miners

At the moment most bitcoin miners use Application Specific Integrated Circuits (ASIC) systems that a configured to mine bitcoin and only bitcoin. These ASICs apart from being specially programmed for mining bitcoin also have the added benefit of not using up too much electricity, which lessens the power consumption of bitcoin miners significantly.

Thus a bitcoin miner, once you have obtained the ASIC processor, you will also need mining software. The older models of ASICs require specialized software but current models usually come pre-configured.

 

More about Bitcoin mining in the Bitcoin whitepaper.