When you hear the word mining, the first thing that will come to your mind is, well, mining. However, Bitcoin mining is simply the process through which more Bitcoins are added to the cryptocurrency ecosystem. In today’s world, learning all you can about Bitcoin mining can help you empower yourself. Bitcoin mining is 100% legal, so you don’t need to worry about the authorities.
How Bitcoin Mining Works
Bitcoin mining requires running some double hash verifications for validating Bitcoin transactions thus providing security for the ledger of the Bitcoin network. During this computational process, the hardware of your computer will calculate mathematical equations that are far from simple.
Bitcoin mining is linked to a difficult rating to ensure that it more coins than necessary aren’t produced daily. As more miners join the network, the rating goes up automatically. As the miners reduce, the rating decreases as well.
Only 21 million Bitcoins can ever be generated. At the time of writing, only 12 million were in circulation. Analysts predict that by 2024, up to 21 Bitcoins would have been mined. Bitcoin mining requires energy just like real-world mining. Apart from just generating the Bitcoins, the miners verify transactions using their computers in a bid to minimize fraud.
During verification, the miner will receive a fee for his work out of that transaction. This means a miner gets paid two times; for verifying the transaction and for creating new Bitcoins.
The Pitfall of Mining
While mining appears to be profitable, the individual responsible for creating Bitcoin put measures in place to make sure that the number of coins in circulation always remain constant. What this means is that a person who could mine 200 Bitcoins in 2009 would need to mine for 98 years to get one Bitcoin in 2014. This is why mining pools were invented to help miners work together.