Every Bitcoin enthusiast, at some point, must have asked themselves the question “where do the Bitcoins come from?”. While banks are responsible for the creation of traditional money, Bitcoins are mined by the miners. This process is called Bitcoin mining. The miners are network participants who execute additional tasks. To be specific, they order transactions chronologically by adding them to the Bitcoin block that they find. Thus, they solve the problem of “double-spend” by preventing the user from spending a Bitcoin twice.
How is Bitcoin Mining Done?
Finding a block is similar to a network lottery. The miner spends a tiny amount of energy in their attempt to find a new block, which is nothing but guessing a lucky number. Most of these attempts fail, and the miner has to try again. The miner succeeds only once in about every ten minutes. If they are successful, they add a new block to the blockchain. This means by the time a valid block is found, the miner will have burned much more energy from all the failed attempts.
Need for Proof-of-Work
Proof-of-work ensures that the miners don’t create Bitcoins out of thin air. They will have to spend energy to earn them. Also, it strengthens Bitcoin’s history. This means that if an attacker wants to alter a completed transaction, they would have to do all the work that has been done since that transaction to catch up. Consequently, they will have to build the longest chain. This is next to impossible, which is why miners make the Bitcoin network secure.
What’s In It For the Miners?
In lieu of securing the network, the miner receives an incentive. Every block that the miner finds comes with a special transaction. This transaction awards new Bitcoins to the miners. When the Bitcoin was launched, the miners were awarded 50 Bitcoins for each block. Today, the “prize” for Bitcoin mining is 12.5 Bitcoins per block. Also, the miners keep any mining fees that were part of the transactions.
Anyone can become a Bitcoin miner. However, over the years, Bitcoin mining has become quite specialized and is mostly done by dedicated professionals, who have access to cheap electricity, specialized hardware, and big data centers. If you have these modern-day amenities at your disposal, you can give Bitcoin or crypto mining a shot too.