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LEARN CRYPTOS : What is Bitcoin mining?

Cryptocurrencies operate on a distributed public ledger called the blockchain, a record of all transactions maintained and held by the holders of a currency.

How are Bitcoins created?

Users can also purchase the currencies from brokers, then store and spend them using crypto wallets.

Buying from dedicated platforms is not the only way to get Bitcoins, although it is quick and easy. In fact, Internet users can also participate in the process of creating new Bitcoins and obtain them.

This is called “Bitcoin mining“.

There is an ongoing global competition – called the mining race – to win the right to add a new block to the blockchain.

To participate in this competition, users must purchase specialized mining equipment that consumes a lot of electricity; the equipment itself is likely to become obsolete quickly due to the constant invention of more efficient equipment – so it is not a profitable activity for most people.

People who engage in this activity are called bitcoin miners.

They participate in this competition for two types of rewards:

  1. the block reward (currently 6.25 BTC) issued to the publisher of each block
  2. the transaction fee – fractions of bitcoins that incentivize miners to include transactions in published blocks.

To make matters worse (from the miner’s point of view), the “difficulty” of the competition increases as the number of miners involved increases, in order to prevent new bitcoins being issued too quickly. The reward in blocks is also halved every four years, making it much more expensive to produce.

 The computers of these Internet users are then put in competition to develop complex mathematical functions that allow the validity of the transaction to be verified. Whoever wins the validation is rewarded with newly created Bitcoins.

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