Bitcoin Mining

Bitcoin has pioneered the boom of cryptocurrencies in the mainstream society, but where it comes from generates confusion to some. Basically, the production of bitcoins is achieved through buying on an exchange, receiving as payment for goods and services, and of course, through mining.

Mining is the term used to refer to the discovery of bitcoins. In this sense, new bitcoins are not really produced; they are somehow discovered, but how?

All Bitcoin information related transactions are contained in a ledger called “block chain”, which serves as the virtual padlock. A miner needs to unlock this to verify Bitcoin transactions. Unlocking involves solving mathematical problems, which have been set up by the system itself. For every verified transaction, a miner receives a reward of 25 newly generated bitcoins.

The process is not just a matter of production in its literal sense, but the method to be equipped with the right technology to discover new bitcoins. Fortunately, one does not need to be an expert to become a miner. As long as you have a Bitcoin wallet with an encrypted bank account, a free software needed to mine, and the mining software itself, you’re entitled to mine your own bitcoins for as long as you want.

However, there is a catch. Basically, there is a finite supply of bitcoins as the system was built to only generate 21 million bitcoins. As of now, there is over 12 million in circulation, thus a little less than nine million bitcoins are waiting to be discovered. Based on the current rate of generation, it is said that the last bitcoin will be mined in 2140.

Also, the system was built in a way that as more bitcoins are discovered, the harder it is to mine for more, which is why there are several mining start-ups aiming to develop a faster mining hardware that can increase the speed of Bitcoin mining in the last few years. The approximate cost of a full mining rig is around $12,000.

To avoid this costly endeavor, a miner can opt to join a mining pool instead of buying a mining rig. A pool is a collective group of miners from around the world, literally pooling their computers to mine. There is a growing number of pool websites that allow small-time miners to connect their computers into the pool in exchange for a percentage of bitcoins earned or discovered.