What is Bitcoin Mining?
Cryptocurrency mining is an arduous activity, not without its costs. Nevertheless, miners are rewarded for their work with digital tokens.
Crypto mining is a strenuous process that can be costly. However, miners receive digital currency in return for it and blockchain technology as well.
With new technologies, it is easier than ever to mine cryptocurrency. Entrepreneurial types see mining as a chance for easy money, just like California gold prospectors in 1849. If you have the technology and know-how, why not get involved?
Possessing an abundance of Bitcoin is a rarity. You have the ability to be one of few who own such a vast sum, however before you invest your time and equipment into mining, read this article that will help you determine whether mining is right for you. We will primarily focus on bitcoin throughout this article (to avoid confusion between "bitcoin" as a cryptocurrency and "bitcoin" when referring to individual tokens). This piece is going to cover everything from what Bitcoins are, how they're mined, the basics behind Bitcoin's blockchain technology and more benefits of investing in bitcoin!
Mining is not a requirement to own cryptocurrency tokens. Mining has become almost synonymous with owning Bitcoin, but there are other ways to get your hands on digital coins. One of these ways includes investing in ICOs (Initial Coin Offerings).
You can also buy cryptocurrencies using fiat currency; you can trade it on an exchange like Bitstamp using another crypto (as an example, using Ethereum or NEO to buy Bitcoin); you even can earn it by shopping, publishing blog posts on platforms that pay users in cryptocurrency, or even set up interest-earning crypto accounts. An example of a crypto blog platform is Steemit, which is kind of like Medium except that users can reward bloggers by paying them in a proprietary cryptocurrency called STEEM. STEEM can then be traded elsewhere for Bitcoin.
The Bitcoin reward that miners receive is an incentive that motivates people to assist in the primary purpose of mining: ensuring transactions are valid. Miners help track all Bitcoin transactions, and if they do not perform this duty, their incentive would be gone and it might lead them to find another way of earning money instead. Rewards for these tasks keep miners motivated because without them, a person could find other work elsewhere in order to make ends meet.
Did you know that with Bitcoin, a double spend is possible? This is when someone spends the same bitcoin twice. If you were to buy something for $20 with physical currency, once you hand it over to the person in exchange for your purchase they no longer have it and there's no risk of them spending it on something else. With Bitcoin, this can happen!
Digital currency is not as safe as paper money. For example, with counterfeit cash someone cannot spend the same dollar twice because it would be a different dollar bill. With digital currency, however, there is a risk that the holder could make copies of the token and send them to merchants or other parties without anyone knowing about it.
You have two $20 bills. One is fake and one is real. You are trying to spend both of them but someone who knows about the serial numbers spots you and reveals which one is false.
The idea that when you have two identical $20 bill, it's possible for both to be a legitimate bill because they're in different denominations (for example, say I have a counterfeit dollar and an original dollar). The problem here lies with the person trying to pass off both as genuine because if somebody knows enough about currency then they can see that the only way this could happen would be if one was fake so it would be easy to spot which one is false even though visually there doesn't seem like much difference between them.
Bitcoin miners are the backbone of the bitcoin system and they make sure that no one has illegitimately spent the same bitcoin twice. This is not a perfect analogy, but in more detail below we'll explain it better.
Miners are paid in bitcoin for their work. Bitcoin is a digital currency that relies on computers to process and approve transactions, so it's no surprise that they need humans, too. The miners verify 1 MB worth of transactions before they have the chance to be rewarded with bitcoin as well as mining fees.
In order for miners to receive their reward from verifying blocks of data, the data must meet certain requirements or "proof-of-work". Once these conditions are met and verified by other miners, then the miner can receive a quantity of bitcoins (as well as mining fee) just like how you would receive money at your job when you complete tasks that others assign you. Since the creation of Bitcoin, a debate has been raging between supporters and critics about whether or not to increase the block size. Some say that an increase in capacity would make transactions quicker and easier for users; others are more cautious because they feel it could be a slippery slope towards centralization. The 1 MB limit was set by Satoshi Nakamoto himself as being optimal at that time for his vision of bitcoin as an online currency with low transaction fees. This limit is a matter of controversy among miners who believe that the block size should be increased to accommodate more data, thereby effectively meaning that the bitcoin network can process and verify transactions quicker.
Bitcoin mining is an increasingly difficult and expensive process with rewards cut in half every four years. In 2009, it would take about 10 minutes to mine 50 bitcoins which were worth $0.00 at the time. Mining 25 bitcoins took twice as much time but was also worth $0.00 when bitcoin first started trading in 2010. In 2012, this was halved again to 12.5 BTC which could be mined in just 5 minutes; a year later those coins were worth $12 each on average so they became more valuable than gold or silver for a while!
In some countries, Bitcoin mining is legal and can provide a lucrative opportunity. For this reason, many people are migrating to those places in order to mine for Bitcoins. In other countries, however, Bitcoin mining is illegal and punishable by law with harsh fines or jail time.