Bitcoin Mining – What Is It, How Does It Work, and Why Do I Care?

Bitcoin Mining – What Is It, How Does It Work, and Why Do I Care?

If you’re new to Bitcoin, the idea of mining virtual currency may seem strange. You probably have several questions:

  • How can you mine something that doesn’t exist?
  • Why do people have massive rooms full of computer equipment?
  • How does the BTC mining process work?
  • Should I even care?

Whatever questions you may have, don’t sweat it, you’re not alone in your confusion.

What is Bitcoin Mining?

The quickest way to understand Bitcoin mining is to forget everything you know about traditional mining. Bitcoin’s don’t require excavators, pick axes, and other real-world equipment, they need computing power.

You see, in the world of crypto mining, Bitcoins are mined when the computing power of your hardware (computers, graphics cards, etc.) solve mathematical problems.

And while this may seem strange, as miners solve these problems, they tether together transactions in the blockchain, which rewards them with brand new Bitcoins. These rewards are handed out to miners every 10 minutes.

When these transactions are tethered together and verified, it provides the blockchain with the integrity it needs to be secure, transparent, and infallible.

But there’s a catch. As more Bitcoins get mined, the mathematical problems get harder, they require additional computing power, and this cycle repeats indefinitely until the final Bitcoin is mined.

Curious how many that is?

The maximum number of Bitcoins that will ever be mined is 21 million. Currently, miners have found around 4.3 million so far.

For many larger miners, maintaining the integrity of the blockchain is a worthwhile endeavor. After all, the average price of Bitcoin at the time of writing this article is around $6,700 USD.

So, by now we know that Bitcoin mining:

  • Rewards miners with new bitcoins
  • Confirms transaction using the computing power of the miner’s equipment
  • Provides vital security to the network

You’re probably thinking, this sounds easy, I’m going to start mining some Bitcoin with my old laptop.

Sadly, those days are over. Bitcoin mining is an extremely competitive field and major companies have entire warehouses full of specialized equipment for the sole purpose of mining Bitcoin.

Miners are the Backbone of the Bitcoin Network

Miners do a lot more than just mine Bitcoins. They are one of the main reasons why Bitcoins are so secure, transparent, and irreversible.

Let’s look at an example:

  • Transactions with 0 confirmations can still be reversed.
  • 1 confirmation is all you need to verify a smaller transaction ($1,000 or less).
  • 3 confirmations are enough to verify $1,000 – $10,000.
  • 6 or more confirmations are recommended for transactions between $10,000 and $1,000,000.

But here’s the catch.

If we didn’t have miners doing what they do, these confirmations wouldn’t happen in the first place. And if a single miner managed to control 51% of the network, they could control the network. But that can never happen because mining is decentralized across tens of thousands of machines.

And there you have it, Bitcoin mining made easy.

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Rafi Hecht

Rafi Hecht is a web programmer and digital marketing specialist with over 12 years experience. He holds a Masters of Science degree from Stevens Institute of Technology and is both Adwords and Bing Ads certified. Rafi currently lives in Toronto.

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