What is Bitcoin Mining?
Bitcoin mining is the process of earning Bitcoins using mining done by the “miners” who are connected to the Bitcoin network since Bitcoin shares its properties with the gold, so the word mining is somewhat associated with gold mining.
As discussed in how does bitcoin works, the total supply is 21 million Bitcoins that are to be generated by the Bitcoin protocol. The miners are responsible for digging up these available Bitcoins.
The Bitcoin Mining Process
Before jumping into discussing the Bitcoin mining process, let’s first discuss the terms that take part in the mining process.
Nodes: Nodes are software’s computers that run the Bitcoin software. Any computer that wants to take part in the mining process could become a node.
(finding some difficult terms? Check our Bitcoin glossary for more information)
Solving Mathematical Problems: Bitcoin mining is performed by high-end computers that solve complex problems that require proper hardware along with luck to be successful in solving the problem.
In the Bitcoin mining process, when a transaction is made on the Bitcoin protocol, all the nodes in the system need to update their copy of the blockchain. The system that solves the mathematical problem is responsible for updating the ledger and in reward of the computational power used, Bitcoin is awarded to the successful node. This process makes sure that the transaction is transparent, and there is no central authority taking control of the blockchain.
What is the purpose of Bitcoin Mining?
Bitcoin Mining is a process that gives the anonymous users a chance to take part in the process, maintain the blockchain and get rewarded in return.
In short Bitcoin Mining Serves the following purposes:
- Issuance of New Bitcoins
- Maintains the transaction record on Block
- Ensuring the safety of transactions made on the network
How are new Bitcoins generated?
Fiat currencies that exist in physical form are printed by central banks. Bitcoins are generated as a result of the mining process. Unlike traditional currencies that are printed as per requirements, Bitcoins are generated as a result of an algorithm that is coded and can’t be changed. A 10-minute interval is set after which new Bitcoins are generated. The reward is given as a result of the computational power used by the network.