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No matter you are a beginner or investor in cryptocurrency market, you may hear the phrase “bitcoin mining”. But what is it? Read this article, we will introduce you everything related to Bitcoin mining.
What is Bitoin Mining?
Mining is the process by which some Bitcoin transactions occur in a period of time are verified, then, recorded on new blocks and added into the blockchain. Computer that used to conduct mining is called miner.
Mining is actually a procedure of ledger keeping, the miner is the ledger keeper, and the blockchain is the distributed ledger system.
The ledger keeping power in the Bitcoin system is decentralized, that is, each miner has chance and right to be a ledger keeper. Miners who successfully confirm the bitcoin transaction and record it in the ledger, it will receive bitcoin as a reward. Mining is also the process of bitcoin production.
What is A Miner?
The Bitcoin mining machine/miner is a professional device that obtains bitcoin rewards by conducting a large amount of calculations to compete for right of ledger keeping. It is generally composed of mining chips, heat sinks and fans, and only performs a single calculation program.
Mining is actually a calculation competition among miners, and the miners who have more powerful computations, will have higher probability of “digging out” bitcoin.
The process of running the chip generates a vast amount of heat. For cooling purpose, Bitcoin mining machines are equipped with heat sinks and fans as well.
How do Miners Mine?
Before the rise of the blockchain, miners specifically refer to the workers who dig the coal mines, who is with dark skin and covered with coal dust. When blockchain comes out, miner is not just a name for coal miners, but there is a new meaning for it: people who engaged in virtual currency mining.
Unlike traditional “miners”, mining tools in the blockchain industry is intelligent and high-tech. Miners is mainly responsible for transaction confirmation and data/blocks packaging. If you want to be a miner, it is actually quite simple. What you need to do is to buy or assemble a dedicated computer, download and install the mining software on it and get started. You have no need to do mining manually by yourselves. In fact, the computer can perform specific calculations. For miners, you just need to maintain the power supply for the mining computer and get it connected to the network all the time.
What is Mining Pool?
Since bitcoin mining requires to consume a large amount of computational resources and the reward will be only sent to the miner who discover the solution of the complex cryptographic puzzle. Miners with a small percentage of the mining power has a very small chance to find the next new block on his own. That’s why miners combine their computational resources together, which produces the mining pool. In other word, a mining pool is a joint group of miners.
Under the proof of work mechanism, the more computational resource you contributed, the more likely you will get the block reward. That's why many miners join together into a mining pool to mining Bitcoin. However, the reward is also split among the miners based on their respective computing contributions. A mining pool undoubtedly increases the success rate to find a block and generate new bitcoin. But it also increases the risks of 51% attack (A group of miners control 51% of the network computing power and they can take full control of the network as a central institution).
How Dose Bitcoin Mining Work?
Every 10 minutes, miners in the whole Bitcoin network calculate a complex computational math problem, also called a “proof of work”. Whoever works out the answer first is equivalent to produce a new block, and the miner can get a certain amount of Bitcoin as an incentive.
To start with, you need to prepare a mining machine (a computer with ASIC hardware), bitcoin address, mining software, etc. However, the current calculation of bitcoin network is too huge.
It is also difficult for an individual to purchase a small number of mining machines to produce blocks and dig out bitcoins. Thus, many miners are bundled together as a mining pool. The bitcoin farm is only responsible for calculations, while the mining pool is responsible for current blocks package.
How Much Can Miners Earn from Bitcoin Mining?
In the first four years of Bitcoin, the amount of block reward is 50 Bitcoins. And every 210,000 blocks or roughly every four years, the block reward is halved. At present, block reward is set as 12.5 Bitcoins, and Bitcoin mining is more and more difficult. In addition, a block in Bitcoin network is generated on average every 10 minutes. That is to say every 10 minutes, there will be 12.5 BTC sent to miners as reward. In 2020 or so, the reward will be halved again to 6.25 BTC.
With the mining reward decreases and the mining difficulty increases, the transaction fees rewarded to miners will make up a much more percentage of miners' income. If you have interest in mining bitcoin, equip your mining machine and join the mining pool.