The digital era has lead to the development of advanced technologies. The development of technology has resulted in some electronic form of money to provide ease of transacting money. The emergence of cryptocurrencies has become possible with advanced computers and technologies. Bitcoin has become the first modern cryptocurrency out of all the currencies across the world.
Traders and investors are attracted towards making investments and deals in bitcoin on a regular basis. This has become possible because of bitcoin’s ultimate features, which include fast and cheap transactions and minimal transaction fees. Traders tend to learn about the bitcoin market and trading techniques and to learn about it, know here for Benefits of bitcoin.
If you have entered into the world of cryptocurrencies and have explored bitcoin, you must have heard the term bitcoin mining. This may have also struck in your mind when you came to know that it provides bitcoin as a reward. Bitcoin mining is the process through which the bitcoin transactions are verified and made legitimate, and new currency coins are discovered. The mining process is performed by specialized computers that solve complex mathematical problems that any individual can’t solve.
What is Bitcoin Mining?
Bitcoin mining is done by the specialized computers referred to as miners who do the work of solving the complex computational puzzles. Mining is done to verify the bitcoin transactions, constitute them into blocks and add them into the blockchain. All the bitcoin transactions are recorded in a distributed public ledger through the process of bitcoin mining.
The bitcoins are finite in number, i.e., 21 million, and currently, 18 million bitcoins are in circulation in the market. With more and more bitcoins being discovered, the computational algorithms are becoming difficult to solve. The miners are required to use complex machinery to fasten the speed of mining operations.
How are transactions recorded?
When a user sends bitcoin to anyone, it makes a transaction. The transactions can be made anywhere and in any form like physical receipts, in-store, and more. The bitcoin miners are required to solve 1MB worth of bitcoin transactions in order to be eligible for a reward. All the miners using computing power compete with each other to solve the transactions faster. 1MB worth of transactions makes a block, and there are thousands of blocks made and added to the blockchain.
Once a block is verified and added to the blockchain, it makes a transaction legitimate. The miners’ job is to use specialized computing power to solve the mathematical problems and ensure that the bitcoin transactions are correct. Miners make sure that the transactions are not duplicate because, in cryptocurrencies, there is a scenario of double-spending. It is a scenario in which the bitcoin user unambiguously spends the same bitcoins twice. To avoid the issue of counterfeit currency, the miners ensure that transactions are correct.
How are miners rewarded?
In the Bitcoin network, there are around 300,000 sales and purchases that take place every single day. The work of verifying every transaction is detailed. It requires a lot of hard work and miners’ efforts to solve the computational puzzles, which get complex every time. To provide compensation, or we can say incentive to miners for their efforts, they are rewarded with a crypto token for solving a block of the transaction and adding it to the blockchain.
With each block that is mined, a new amount of bitcoin is released, which is referred to as “block reward.” The protocol is set by the founder of bitcoin, Satoshi Nakamoto, who says that the block reward will get halved after every four years, Since bitcoin was introduced in 2009, the block reward started from 50 BTCs, and as of 2020, the reward is halved to 6.25 BTCs. This process of mining will continue till every single bitcoin is discovered, and it is estimated that this process will continue till 2140.
The fees or rewards that miners are provided are a kind of incentive for the efforts that they help in regulating bitcoin and make the bitcoin network going. The incentives are provided to encourage and motivate them towards the mining process and as an appreciation for their efforts.
