What Is Bitcoin Mining?


Bitcoin mining is the process by which new bitcoins are entered into circulation; it is

also the way that new transactions are confirmed by the network and a critical component of

the maintenance and development of the blockchain ledger. "Mining" is performed

using sophisticated hardware that solves an extremely complex computational math problem. The

first computer to find the solution to the problem is awarded the next block of bitcoins and

the process begins again.


Cryptocurrency mining is painstaking, costly, and only sporadically rewarding.

Nonetheless, mining has a magnetic appeal for many investors interested in cryptocurrency

because of the fact that Asic Miners are

rewarded for their work with crypto tokens. This may be because entrepreneurial types see

mining as pennies from heaven, like California gold prospectors in 1849. And if you are

technologically inclined, why not do it?


However, before you invest the time and equipment, read this explainer to see whether

mining is really for you.

A New Gold Rush


The primary draw for many mining is the prospect of being rewarded with Bitcoin. That

said, you certainly don't have to be an Antminer to own cryptocurrency tokens. You can also buy cryptocurrencies

using fiat currency; you can trade it on an exchange like Bitstamp using another crypto (as an

example, using Ethereum or NEO to buy Bitcoin); you even can earn it by shopping, publishing

blog posts on platforms that pay users in cryptocurrency, or even set up interest-earning

crypto accounts.

An example of a crypto blog platform is Steemit, which is kind of like Medium except that

users can reward bloggers by paying them in a proprietary cryptocurrency called STEEM. STEEM

can then be traded elsewhere for Bitcoin.

The Bitcoin reward that Whatsminer

s receive is an incentive that motivates people to assist in the primary purpose of

mining: to legitimize and monitor Bitcoin transactions, ensuring their validity. Because these

responsibilities are spread among many users all over the world, Bitcoin is a

"decentralized" cryptocurrency, or one that does not rely on any central authority

like a central bank or government to oversee its regulation.

Mining to Prevent Double Spend

Avalon Miners are getting

paid for their work as auditors. They are doing the work of verifying the legitimacy of

Bitcoin transactions. This convention is meant to keep Bitcoin users honest and was conceived

by Bitcoin's founder, Satoshi Nakamoto.1 By verifying transactions, miners are helping to

prevent the "double-spending problem."

Double spending is a scenario in which a Bitcoin owner illicitly spends the same bitcoin

twice. With physical currency, this isn't an issue: once you hand someone a $20 bill to

buy a bottle of vodka, you no longer have it, so there's no danger you could use that same

$20 bill to buy lotto tickets next door. While there is the possibility of counterfeit cash

being made, it is not exactly the same as literally spending the same dollar twice. With

digital currency, however, as the Investopedia dictionary explains, "there is a risk that

the holder could make a copy of the digital token and send it to a merchant or another party

while retaining the original."

Let's say you had one legitimate $20 bill and one counterfeit of that same $20. If you

were to try to spend both the real bill and the fake one, someone that took the trouble of

looking at both of the bills' serial numbers would see that they were the same number, and

thus one of them had to be false. What a Bitcoin Innosilicon Miner does is analogous to that—they check

transactions to make sure that users have not illegitimately tried to spend the same bitcoin

twice. This isn't a perfect analogy—we'll explain in more detail below.

Mining to Produce New Bitcoins

In addition to lining the pockets of miners and supporting the Bitcoin ecosystem, mining

serves another vital purpose: It is the only way to release new cryptocurrency into

circulation. In other words, miners are basically "minting" currency. For example,

as of September 2021, there were around 18.82 million bitcoins in circulation, out of an

ultimate total of 21 million.2


Aside from the coins minted via the genesis block (the very first block, which was created

by founder Satoshi Nakamoto), every single one of those bitcoins came into being because of

miners. In the absence of miners, Bitcoin as a network would still exist and be usable, but

there would never be any additional bitcoin. However, because the rate of bitcoin

"mined" is reduced over time, the final bitcoin won't be circulated until around

the year 2140. This does not mean that transactions will cease to be verified. Miners will

continue to verify transactions and will be paid in fees for doing so in order to keep the

integrity of Bitcoin's network.3

To earn new bitcoins, you need to be the first miner to arrive at the right answer, or

closest answer, to a numeric problem. This process is also known as proof of work (PoW). To

begin mining is to start engaging in this proof-of-work activity to find the answer to the

puzzle.


No advanced math or computation is really involved. You may have heard that miners are

solving difficult mathematical problems—that's true but not because the math itself is

hard. What they're actually doing is trying to be the first miner to come up with a 64-

digit hexadecimal number (a "hash") that is less than or equal to the target hash.

It's basically guesswork.1

It is a matter of guesswork or randomness, but with the total number of possible guesses

for each of these problems being on the order of trillions, it's incredibly arduous work.

And the number of possible solutions only increases the more miners that join the mining

network (known as the mining difficulty). In order to solve a problem first,

Goldshell Miners need a lot of

computing power. To mine successfully, you need to have a high "hash rate," which is

measured in terms gigahashes per second (GH/s) and terahashes per second (TH/s).

Mining and Voting Power

Aside from the short-term payoff of newly minted bitcoins, being a coin miner can also

give you "voting" power when changes are proposed in the Bitcoin network protocol.

This is known as a BIP (Bitcoin Improvement Protocol). In other words, miners have some degree

of influence on the decision-making process on such matters as forking. The more hash power

you possess, the more votes you have to cast for such initiatives.

How Much a Miner Earns

The rewards for Bitcoin mining are reduced by half roughly every four years.1 When bitcoin

was first mined in 2009, mining one block would earn you 50 BTC. In 2012, this was halved to

25 BTC. By 2016, this was halved again to 12.5 BTC. On May 11, 2020, the reward halved again

to 6.25 BTC.