Photo Credit: pexels
Paper money comes from a central authority – the government, represented by the central bank. It is this central authority that decides on when the next printing will be and how the printed money is distributed.
But bitcoin mining is a decentralized process that works on the principle of computation. And with bitcoin mining, no single authority controls how and when bitcoins are distributed.
First and foremost, we should let you know that not all bitcoin users mine bitcoins. In fact, most of them don’t, instead they mainly participate in Bitcoin exchanges. However, you’ll find this article very helpful if you are interested in joining the ranks of bitcoin miners.
We should also let you know that the bitcoin mining market is comparatively volatile and competitive. Furthermore, it requires serious computing resources. Therefore, it will make sense if your plan is to get involved seriously and you have calculated the risks and potential losses.
If you would like to get involved because you want to make profits, you should know that cryptocurrency mining is not a get-rich-quickly scheme.
Let’s help you paint the reward picture so you understand what we are driving at.
With every mined block comes the release of new bitcoins, referred to as block reward. The block reward which started in 2009 at 50 is halved after every four years and it will continue to reduce in that pattern. So, the current value of the block reward (as at 2018 is 12.5).
In any case, bitcoin mining serves two major purposes. The first is to confirm transactions securely with ample computational effort being given to each certain block. The other is to create fresh bitcoins in a block as a reward system for miners who solve the computational problems that constitute the mining.
So, here’s how bitcoin mining works:
Usually, a transaction is initiated first. This transaction is then bundled with numerous transactions of the sort into a ‘location’ known as a block.
Miners then verify and confirm that every transaction in each block is legitimate and secure. As soon as this is done, miners further proceed to solve a given mathematical problem.
The miner who solves the problems in each block correctly and is the first to do so receives a reward. The aim of the reward system is to incentivize the miners to keep verifying transactions.
Finally, all verified transactions are saved to the blockchain ledger. This finalizes the transfer of the coins’ ownership.
We believe the infographic below will give you an awesome visual representation of how bitcoin mining works.
Guest Post: Muninder is a software engineering graduate, researcher on user design for websites, usability analysis—and overall a tech geek. I’m in charge of keeping this machine—that is WebsiteBuilder.org site—running nice and steady. I make sure that everything related to our webpage runs smoothly, from the web design to the user-friendliness. And I integrate the concepts of usability, user design and technologies to make site load fast in to our site to make it fast, usable and likable for you, user.