Bitcoin is an open source peer to peer digital currency. Bitcoin mining is a process to gain “free Bitcoin” as a reward for contributing in Bitcoin network. Bitcoin is becoming very popular these days as a cryptocurrency and with the price of Bitcoin skyrocketing, Bitcoin mining attracting more and more people everyday. In this article, we’ll try to explain the complex process of Bitcoin mining as simply as possible.
We have also added a Bitcoin Mining Calculator for those who want to see if their mining efforts are/will be profitable.
How Bitcoin mining works?
Bitcoin keeps record of every transaction in a unique publicly shared ledger known as “Block Chain”. Block Chain is a massive shared database containing every successful transaction record. It automatically broadcasts itself to the Bitcoin network so everyone connected to the Bitcoin Network can access it.
As a Bitcoin miner, your job is to verify the transaction of Block Chain, then add the verified / solved data to it as “Blocks”. It’s like solving a puzzle, and getting rewarded every time you can successfully solve it. Don’t worry, you won’t have to actually solve anything by yourself, the Bitcoin network software will do it for you. As a Bitcoin miner, you just need to provide enough computing power for the software to work.
The entire Bitcoin Mining process will happen every 10 minutes or so. If you can successfully mine a block and add it to the Block Chain, you will be rewarded with a certain amount of Bitcoin for your trouble. Every 4 years, the reward amount will reduce to half, it started as 50 Bitcoin, and currently its 25 Bitcoin for every successful block mined.
So, as you can see, anyone can become a Bit Coin Miner if they want to. All you need to do is download the software from Bitcoin Network and providing raw computing power for it to work properly. Technically your only costs are electricity bills. If you can successfully solve the next block, the reward is all yours. The more processing power you can provide, the greater chance you have for successful mining. Because of increasing difficulty of mining blocks and massive competition, group mining (pool mining) has become a very popular way of Bitcoin mining. “Mining Pool”s are services where you can split the work among a group of miners and share the Bitcoin when a block is mined successfully. This way, you can mine faster and more effectively. One of the popular Bitcoin mining pool is “Slush’s pool”, for more detailed information about pool mining and review of Bitcoin mining pools, read our article here.
Is it really that easy?
Technically yes! You fire up the software with enough computing power, you are golden. But in reality it’s a different picture. The difficulty in solving every block keeps increasing with the amount of solved blocks. You also need to consider the huge number of Bitcoin miners with super advanced hardware trying to mine Bitcoin all the time. At this point, it’s extremely hard to do Bitcoin Mining without superior hardware and massive computing power.
Bitcoin Mining is more like a competition. Think about a puzzle solving competition where whoever solves the puzzle first, wins first prize. You don’t need the fastest computer in the world to become a successful Bitcoin miner. But having faster hardware than others certainly gives you a better chance to mine more blocks successfully. Bitcoin Mining is not impossible or only limited to advanced people, as thousands of miners worldwide are doing it all the time. If you are determined to mine Bitcoin and have access to powerful computer hardware, then you can get your fair share of free Bitcoin too.
Still interested? Check out our article on what bitcoin mining hardware to use.