The cryptocurrencies are not created like fiat currencies but are mined. The process of cryptocurrency mining is costly and but is also lucrative. The mining process has gained popularity and attracts investors with its magnetic appeal to reward mining cryptocurrency. Those who are unaware of the fact, the cryptocurrency miners are rewarded with newly created crypto tokens for their hard work and efforts. But before you get attracted to the mining process, you need to learn a lot about mining cryptocurrencies.
Bitcoin is the most popular cryptocurrency in today’s time. The value and features of bitcoin have made it enter into the mainstream. Some people prefer to buy bitcoin from exchanges that are online marketplaces, while some prefer to mine bitcoin on their own. The miners need to invest in hardware and equipment for the mining process and learn many things about it. Mining and trading in bitcoin have become easier because of Immediate Edge
The bitcoin miners are rewarded with bitcoin as an incentive for their efforts. The reward is provided to motivate the miners to keep on doing their work passionately. The main purpose of mining bitcoin is to make the bitcoin transactions legitimate and make them valid. Bitcoin is a decentralized currency, and it is not dependent on the government to make the transactions legitimate, and bitcoin users do it themselves.
The Process of Bitcoin Mining
Miners get the newly created bitcoin as rewards, just like employees get a salary for their work. Miners use specialized computers to verify the bitcoin transactions and make them legitimate. This protocol of mining was set by the founder of bitcoin, Satoshi Nakamoto. The mining process was developed to help users prevent the problem of double-spending. For those who are unaware of double-spending, it is the situation in which the bitcoin owner unlawfully spends a similar bitcoin twice.
This is not an issue in fiat currencies as you pay for your things, and you no longer have that money. This is only the issue when using digital currencies. There is always a risk that the bitcoin owner may make a duplicate digital token in digital currencies and can use it twice unlawfully. Here comes the bitcoin miner who does the work of verifying the bitcoin transactions to ensure that the bitcoin owner doesn’t use it illicitly twice.
The miners are given a time limit of 10 minutes in which they need to verify 1 MB of transactions. The 1 MB of transactions constitutes a “block.” The miner competes with each other, and one who solves the bitcoin transactions fast get the reward of newly mined bitcoins. The founder of bitcoin, Satoshi Nakamoto, set the block reward rule and limit of 1MB transactions. There have been many controversies on block size limit as miners say that block size must be increased to gather more data in a block.
Solving 1MB of transactions makes miners eligible to get bitcoin mining, and not every miner gets the reward for verifying transactions. The miners need to meet two basic conditions to earn the reward of bitcoin mining. The two conditions include verifying the 1MB of transactions. The other is to be the only miner to solve the mathematical computational problem, referred to as Proof of Work (PoW).
How many Bitcoins are in circulation?
As of 2020, there are more than 18.5 million bitcoins that are in circulation. The crypto analysts believe that the last bitcoin token will be mined till the year 2140. Till then, the miners will keep on solving mathematical algorithms and earn bitcoin for their hard work. If there were no miners, the bitcoin network would exist, but there would be no sense as there will be no additional bitcoin that will ever be created. There is only a limited supply of bitcoin, i.e., 21 million.
With more and more bitcoins being mined, the complexity of solving the bitcoins has been increased. Even after 2140, when the last bitcoin will be mined, the miners will verify the bitcoin transactions and get the reward of bitcoins as their fees. Bitcoin mining is quite an appealing process, and it has attracted a lot of investors to it.