Bitcoin mining is a complicated process, but it can be quite rewarding, especially in light of the rising prices. However, as a stable second source of income, it might not be viable. It requires a lot of electric power to do it, and you will also need some powerful hardware. So how does it all work?
Why Bitcoin Mining is Necessary
When Satoshi Nakamoto created bitcoin, he wanted to create a system of tokens online that would not require a central intermediary. Instead, all of the record keeping is done using blockchain. It is an ever-growing ledger that holds the history of all transaction of all Bitcoins in existence.
However, if there is no central authority, who determines which transactions need to be added to the blockchain? The answer to this question is mining. It serves as a verification process, with miners getting a small reward for their effort.
How the Mining Process Works
Every few minutes of every day, a mining computer will collect a few pending transactions and turn them into a mathematical equation. The first machine that solves the puzzle announces the solution to other miners. Other miners then check whether the answer is correct and whether money should be sent. If there are enough approvals, the miners move onto the next transaction.
This process is repeated over and over. The miner who was first to find the solution is awarded a few Bitcoin for their effort. It gives miners incentive to take part in the system to validate all the transactions which are taking place. If someone wanted to hijack the process and create double Bitcoin, he or she would need more computing power than the 500 most powerful supercomputers on earth. Out of their effort, they would get one Bitcoin. It makes it highly unlikely that it will happen.
How Much Can You Earn?
Bitcoin mining is thus the process of solving blocks of transactions. When this happens, the reward is currently set as 12.5 bitcoin. At the current prices of bitcoin, you could potentially make over $100,000.
Initially, mining a block of Bitcoin used to earn you 50 BTC. However, that has been halved repeatedly as time has passed. It is the only way to keep miners incentivized to mine for more Bitcoin. It is possible to know when the next halving will occur by consulting the bitcoin clock.
Danger of Bitcoin Mining
When Satoshi Nakamoto created bitcoin, he must not have anticipated mining pools. These are groups of miners who band together to increase their chances of getting a reward. However, if a mining pool were to exceed 51% of all miners, it would be a potential disaster. It could cause them to start falsifying Bitcoin transactions. Luckily, those in the mining pool would have the most to lose if there was any false Bitcoin going around. Thus, most miners usually disband and join other mining pools.
Do you think Bitcoin mining is worth it? Are the costs worth the rewards? Leave us your thoughts in the comment section.