Cryptocurrency mining is a complicated process but is rewarding as well. The mining process has attracted many investors because they find it the best way to earn money without investing in it. Many investors have become millionaires by investing, trading, and mining bitcoins. Undoubtedly mining process doesn’t require users to invest in bitcoin, but it requires high computing power to mine bitcoins. In Bitcoin mining, miners need to learn the entire concept of bitcoin, it’s working, and its technology. It would be best if you got a thorough understanding of bitcoin as a network or cryptocurrency. More information is highlighted here.
The main reason behind investors getting attracted to the mining process is the block reward they can earn in bitcoins. You can gain bitcoins from the mining process, but to own bitcoins, you don’t need to become minor as there are many other ways. Some people do not prefer the mining process. Instead, they choose to buy bitcoins from crypto exchange using fiat currencies or earning bitcoins by shopping at different websites or earning interest in their investments in bitcoins. There are a plethora of ways to earn bitcoin.
The mining reward was set by bitcoin, Satoshi Nakamoto, to encourage miners to mining bitcoins more. The block reward is a kind of incentive that motivates and encourages miners to contribute to the bitcoin community. Bitcoin miners do fulfill the main purposes of the mining concept that include ensuring the validity of Bitcoin transactions and legitimating them. The responsibility of ensuring the validity of the transaction isn’t given to a particular person or central authority. Still, it is spread to different nodes of blockchain that are located across the world.
How are Bitcoins Mined?
The work of miners is the same as auditors as they are paid incentives for verifying the bitcoin transactions and making them legitimate. The entire mining process is to make sure that bitcoin users remain honest with the network while making bitcoin transactions. The mining process was set by the founder of bitcoin, known as Satoshi Nakamoto. Earlier, there were double-spending issues, but with the introduction of the mining process, these issues were eliminated.
Some people don’t know what the double-spending problem is; it is a scenario or case where bitcoin miners spend the same digital coins twice, either intentionally or unintentionally. There were any issues of double spending in fiat currencies because once you pay the money, that money is no longer with you. Digital currencies are transferred over the internet. There is no physical existence of these currencies which means there is a risk that bitcoin holders can make a copy or fake digital coin and transfer it to another party.
Bitcoin miners are required to verify bitcoin transactions of 1MB worth that constitute a block. Then the miners get eligible to earn the bitcoin reward. The founder of bitcoin set the limit or size of the block, and miners often raise many controversies over the block size, which results in slow processing of bitcoin transactions. If block size was more, it would accumulate more transactions, and the processing will be done faster.
Bitcoin is a decentralized network, and no central authority is involved in its supply and cannot manipulate its demand and value in the market. There is a limited supply of bitcoin, and there are 21 million bitcoins that could exist even in the economy. As of 2020, around 12.5 bitcoins are discovered and are in circulation, and the rest are yet to be discovered by miners according to demand or user adoption. Mining is the only process of discovering new bitcoins and regulating them in the market.
Even after all the bitcoins are mined, the bitcoin network will stay usable in the absence of miners. The rate of mining is set to get reduced over time because of a limited supply of bitcoins. After all, bitcoins are discovered, the miners will continue to do the verification process of bitcoin transactions but will be paid differently. As of 2020, the block reward for solving each block has halved to 6.25 BTC, which is a great sum of money that miners earn.