Mom, where do bitcoins come from? Explanation of Bitcoin mining

“Mom, where do bitcoins come from?” Well, you see when a brilliant young Bitcoin catches the eye of an ambitious miner, and because they love each other very much …

Wait, this is obviously too difficult to solve here. Also, my whole goal is to keep things simple. Anyway, bitcoins are created by solving complex mathematical problems. This is done using a powerful machine created to solve these mathematical problems. This process is called mining. The people who own these machines to make money on bitcoin mining are called Miners. When a group of problems is solved, it becomes known as a block. Blocks are checked by other users, and after checking them they are added to what is called a chain of blocks. This chain continues to grow, adding a new block about every 10 minutes. This chain is just a major book that will continue to grow and never end.

Very powerful mining machines consume more power and increase Miner’s monthly utility bill. The reason why so much effort is required is the genius of the mathematics involved. This requires the mining machine to perform complex cryptographic algorithms. Once the machine solves a mathematical problem, a block of coins is born. Each time 210,000 blocks were created, the Miner Award is halved. It will take 4 years. So it’s kind of like the Bitcoin Olympics. Currently, the reward for the block is 12 bitcoins (June 23, 2020, the reward will be only 6 coins). These coins go to the miner, whose car at the time became the lucky winner of the lottery. Every 10 minutes there is a winner. There are also a lot of miners competing. Said Miner now has something valuable. Have enough coins and you pay your electricity bill and then a few.

There is another way of extraction. This is called cloud mining. With this type of mining you pay for using someone else’s network and it greatly reduces your profits. The positive advantages of this method is that it does not require the use of electricity or even the purchase of a machine.

Sounds good to me. I want to start mining now. Is this a good idea and can I earn passive income on a regular basis? Probably. Hold on for now and you can make that call later.

Let’s try to figure this out.

Returning to the original method of machine mining, you will need to start with the purchase of quality mining. It will cost you about $ 2,000. Here is a picture of a good machine (Antminer S9 from Bitmain) capable of creating a high hashrate of 14 TH / s. 1 TH / s is 1,000,000,000,000 hashes per second. This machine does 14 times more. This is a great hashing power. A hash is just a very long number that a machine creates every time it tries to solve an algorithm. Again, if you use your lottery analogy, all of these cars haveh in the hopes of becoming the next winner.

Then your chances of winning become more difficult with increasing competition. Complicating the matter even more is the fact that every time a mathematical problem is solved, the next problem becomes more and more difficult to solve. The complexity of the Bitcoin network changes approximately every two weeks or 2016 blocks. The number of bitcoins that will ever be created is limited. That number is 21,000,000. Once we reach that number, bitcoin can never be mined again. However, the chain of blocks itself will continue to expand because it is used to verify every transaction or purchase.

Remember that pseudonym Satoshi Nakamoto, about whom I also wrote? Did you know that today’s math problems are more than 70,000 times more difficult to solve machines than we mined the first bitcoin back in 2009 ?! It is estimated that the final coin will be mined in 2140 because the system is halved every four years (210,000 blocks). 16,400,000 coins (78%) have already been mined, and much less will be mined from now on. Yes, you read that right. Basically 80% has been mined in the first 8 years, and the extraction of the last 20% will take more than 100 years. If any of my great, great, great-grandchildren read this, I hope you sit well with our family’s bitcoins, which are now valued at 220,000 per bitcoin. We can all dream right!

Buying a mining machine or purchasing a cloud mining contract is risky. While there are some great success stories, be sure to study them carefully before deciding if mining is right for you. For every person who makes money, there are many people who lose money.

By the way, Coin Market Cap is a great resource to see all cryptocurrencies, their common coins and market capitalization. You can see all 700 plus altcoins flying overnight. Altcoin is another way to tell any cryptocurrency coin that is not bitcoin. Now you probably know that bitcoin is like the Rose Bowl, the grandfather of all! I would really try to limit my attention and research to the top 10. Not that there are now no success stories from one of the almost insignificant. Just finding it is like choosing the right penny stock. A much safer game with well-known companies that are recognized by major analysts. The same goes for the stock market you use to buy, sell and trade. That’s why I use Coinbase to make trades as it is the most reliable, secure and convenient exchange. They also have the most thorough verification process when it comes to adding altcoins.

Here is a summary of the key points from this article:

-Bitcoins are created from mining

-Manufacturing is done with powerful machines that solve complex mathematical problems. You can also purchase contracts called cloud mining if you don’t want to buy a car.

-Problems intensify as coins are mined and production speeds slow

-As of May 2017, only 72 bitcoins were mined per hour (12 every 10 minutes)

-June 23, 2020 it will again be halved to just 6 created every 10 minutes

– Almost 80% of the final 21,000,000 Bitcoin coins have already been mined

-Competition among miners and increasingly complex mathematical problems complicate profit making

– The final coin is estimated to be mined in 2140