What is Bitcoin Mining?
What is Bitcoin Mining? Since Bitcoin operates on a decentralised blockchain where no single individual, company or government is in control of the network, there.
What is Bitcoin Mining?
Since Bitcoin operates on a decentralised blockchain where no single individual, company or government is in control of the network, there needs to be a consensus system where someone or something will validate and authenticate Bitcoin transactions in a fair, decentralised and tamperproof way.
This is the role of a Bitcoin miner, otherwise known as a BTC network node.
Bitcoin miners are Bitcoin users who lease out their computers’ computational power to autonomously facilitate and verify transactions on the Bitcoin network in real-time. ⚡
Bitcoin mining is essentially what happens when you run Bitcoin mining software on your computer – software that utilises your PC’s hardware to autonomously validate transactions on the Bitcoin network.
A Bitcoin mining node can be anything from your laptop running Bitcoin mining software to a fully-fledged Bitcoin mining supercomputer, as shown in the image above. Regardless of your rig, the key idea is basically the same.
When a Bitcoin node is mining, it is simply working out and completing a series of cryptographic mathematical problems which are required for Bitcoin transactions to settle and confirm on the network. As your Bitcoin miner is running, it is communicating with all the other nodes on the network in a synchronized fashion.
Bitcoin miners coherently validate blocks of data entries (transactions) on the Bitcoin network, whilst simultaneously sharing the data with the rest of the Bitcoin miners to confirm that every transaction has been correctly validated.
This realtime synchronisation also prevents a Bitcoin transaction from being completed twice, otherwise known as double-spending. (The doubling up of entries/transactions on the Bitcoin blockchain.)
The incentive for doing this is that Bitcoin miners receive a reward for every time their computer or mining rig successfully validates a block of transactions on the Bitcoin network.
When the network rewards a miner, it simply sends some Bitcoin to the wallet that is linked to miners’ machine.
This is how Bitcoins blockchain network runs in a decentralised fashion, as the powerhouse of the network are stand-alone miners wanting to profit for their own interests. A blockchain like Bitcoin is not powered by one individual, corporation or government, but rather by mass collaboration powered by collective self-interest.
Since the Bitcoin blockchain is a public ledger, it is 100% transparent to the public to view, so it’s possible to view the state of any ongoing transaction in real-time.
It is also possible to watch the Bitcoin miners work through your ongoing transactions.
You can see an example of the Bitcoin miners in action on the BTC blockchain here:
What is the 2020 Bitcoin halving?
Since the price of Bitcoin is expected to increase over the years as more people buy Bitcoin and start using it as a currency or store of value, the blockchain has an inbuilt event to cut the reward in half for mining a block, once every 210,000 blocks. This was a feature implemented to balance out the reward so there will always be an incentive for miners. You can learn more about this here.
Can Anyone Mine Bitcoin?
Yes, anyone with a computer can mine Bitcoin, however, there is a big difference in the profitability of using an 800$ laptop vs a dedicated mining rig. These set-ups can cost thousands of dollars per unit, and they can be pooled together into huge mining super-computers, like the image shown below.
How much energy does Crypto Mining Consume?
The amount of energy that is used up to mine bitcoin alone is just over 1% of the worlds energy output, about the same as the total energy consumption of Portugal.
You can, however, hook up your mining rig to a renewable energy generator, like a solar farm, to theoretically mine cryptocurrency indefinitely without having to pay a dime, apart for the overheads for the system components and maintenance themselves.
Some alternative cryptocurrencies have different consensus systems, ones that use much less energy and run much more efficiently than Bitcoin in its current state. You can learn more about the different consensus systems here.