What is Bitcoin mining and how does it work?

To understand this we need to ask a different question: Where do Bitcoins come from?

Normal Governments simply print money whenever they decide to, but Bitcoin doesn’t have a central Government.

So it has to have a way of “Printing” its own money, right?

With Bitcoin, Miners generate Bitcoin by solving math problems using special software and then receive some Bitcoin as a reward.

This method also provides an incentive for more and more people to get interested in Mining Bitcoin.

Over the years, the math problems had to become more difficult because miners began to develop software and use bigger machines for their mining.

The problems have become so difficult that ordinary people can’t mine Bitcoin. (If you see a website telling you you can mine Bitcoin on your phone, please run)

This “Mining” is also used to validate and approve transactions, making it a very secure network. The miners receive an extra fee for approving transactions, so yes — they get paid twice.

As Bitcoin became more popular, more miners joined the network, which is good for the security but leads to an increase in competition. Added to that, the rewards miners get reduces after 4 years, a concept called Bitcoin halving.

Bitcoin halving is a system used to reduce the number of Bitcoins miners receive as their reward for mining Bitcoin.

It is usually reduced by half every four years. Bitcoin rewards were reduced from 50 BTC to 25 BTC in 2012.

In 2016, it was further reduced from 25 BTC to 12.5 BTC. (This was the second halving) The 3rd halving happened in 2020 when Bitcoin rewards were reduced to 6.25 BTC per miner.

You might say the miners are being cheated because they keep receiving less Bitcoin every year, but if you ask me, they don’t really care cos the price of Bitcoin just keeps going higher and higher.

There have been talks that these miners may not continue the mining work if the amount of BTC being paid to them reduces, but it won’t matter if 1 Bitcoin keeps increasing in value.

However, if Bitcoin doesn’t increase in value over time, it would force the miners to demand higher transaction fees from users, which will make the system more expensive to run.

Well, let’s all just hope that doesn’t happen.

I hope you enjoyed today’s reading?

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About the Author

My name is Prince Obinna, and I’m a creative industry-specific content writer and cryptocurrency enthusiast with over 1 year of experience and knowledge of the constantly evolving blockchain space.

I am skilled in copywriting, content marketing, and content strategy, and have 4+ years of experience in all three fields.

I became interested in Web 3 in 2020 and started writing about Web 3 in 2021.

I also teach others how to get started in the blockchain space and also how they can get Jobs in this space.

My goal is to make blockchain learning easy for anyone to understand. Thanks for sticking with me! 😊