You may ask yourself “What is Bitcoin Mining?" and "where do Bitcoins come from?” Bitcoins
aren’t printed out like traditional money, they
are mined out of the system. A
miner is just a person with a computer that runs a mining program on it. The
reason it’s called mining is that Just
like any other natural resource, there is a finite amount of Bitcoins.
The maximum amount of Bitcoins that can be generated is 21 million. Until
today over 12 million Bitcoins were mined. Just
like real-world mining, you
need to invest energy in order to extract these Bitcoins. This
miner’s computer needs to solve complex mathematical problems, and
once it solves them, new
Bitcoins are generated and awarded to him. But
miners don’t just generate new Bitcoins. They
also use their computers to verify transactions and prevent fraud. So
more miners mean faster transaction verifications and
less fraud. That’s
why we want to compensate miners for their hard work.
When
verifying a transaction the
miner gets a small fee out of that transaction for his work. So
Miners get paid twice; once
for verifying the transactions and
again when they successfully generate new Bitcoins. Sounds
profitable? Well,
not so fast. Satoshi,
the guy who invented Bitcoin, wanted
the number of Bitcoins that were mined each time to
remain constant, no
matter how many miners come aboard. That’s
why the difficulty of mining increases as more miners join the network.
In
2009 you could mine 200 Bitcoins with your personal computer at home. In 2014 it will take you about 98 years to mine just 1...That’s
why ASIC miners were invented. Super
powerful computers designed just for mining Bitcoins. But
since so many miners have joined in the past few years it’s
still almost impossible to mine alone.
To
solve this problem mining pools were invented. Groups
of miners formed together to deal with the growing difficulty of Bitcoin mining. Each
miner gets paid for his relative share of the work. So
that’s how Bitcoins are born, through
miners.
