When we talk about Bitcoin mining, perhaps you remember traditional miners who are working in mines. But, in cryptocurrency world the term “miners” and “mining” use differently. Bitcoin miners add transaction records to the Bitcoin public ledger called Blockchain. Miners confirm every transaction and make sure that they all are legitimate. When a transaction is confirmed, the miners will receive some amount of Bitcoin as block reward.
This process called “mining”, because it has similarities with gold mining. The same as gold resources that are limited in the world, the total amount of all Bitcoins also limited to 21 million coins. Perhaps it became a question in your mind that how does this process work. In this article we are going to explain Bitcoin mining process.
Miners and Bitcoin mining
As we mentioned above, miners on Bitcoin network validate the transactions and then receive some amount of Bitcoin in return. Each miner requires solving a mathematical problem in order to validate a transaction. Once, the transaction is confirmed it will be added to the blockchain. This process requires special hardware. A miner, who has a more powerful hardware and contribute with more hash power in the network, would be able to solve the problem faster and get the reward.
There are some terms, which use in Bitcoin mining industry. Here, we are going to have explanation about those terms.
Node refers to a computer, which stores a copy of blockchain. The blockchain updates constantly. As a result, the node should be online and be updated to the newest version of the blockchain. Every one with a high performance computer and downloading the Bitcoin mining software could become a node. This computer will process the data and solve mathematical problems. A node will send data to other nodes as well as receiving data from others. The process of sending and receiving data is running constantly. As a result, the data spread through the network quickly.
Miners are nodes, which process the data and add a new block to the blockchain. Miners use special hardware, which designed specifically for Bitcoin mining purpose. Once the hardware solved the mathematical problem, it will spread data through the network. After all the nodes’ consensus, the miner is eligible to add a new block to the blockchain. In return the miner will receive some amount of Bitcoin as block reward.
Bitcoin mining reward
At the time of writing, the block reward is 6.25 BTC. There are thousands of miners worldwide that all are competing to solve a block and get the reward. A miner, which contribute to the network with more hash power would be able to solve the block faster and get the reward. The average time to add a new block to Bitcoin blockchain is around 10 minutes. But, why 10 minutes? This is the standard time, which Bitcoin developers specified for creating a new block.
It’s notable that Bitcoin mining is costly. The expenses include the mining hardware, electricity, and taxes. Bitcoin designed in a way that mining reward halve almost every 4 years or every 210000 block. As we mentioned before, the total amount of Bitcoins is limited to 21 million. As a result, after each halving the price of Bitcoin may increase due to supply and demand.
In this article, we tried to explain Bitcoin mining in simple words. But, it’s not all about mining. Bitcoin mining is a complex procedure, which requires technical explanations. We will write more about Bitcoin mining in the future in order to make it clearer for you to understand it.