What is Bitcoin Mining? How to Mine Bitcoin?
In the traditional finance, fiat money is printed as a result of the decisions taken by the central authorities. In blockchain technology, cryptocurrencies are produced as a result of a series of processes called mining. So devices with special software and hardware approve crypto money transfer transactions by solving complex problems, and as a result, they are rewarded with newly produced crypto money. Cryptocurrency mining started with Bitcoin, the first cryptocurrency that emerged with the blockchain technology. If you have questions like what is Bitcoin mining or how to mine Bitcoin then you will find the answers in this article.
What is Bitcoin mining?
In blockchain technology, cryptocurrency mining is carried out by finding solutions to complex mathematical problems with special hardware devices. Bitcoin mining covers the process of verifying Bitcoin blocks using the processor power of the devices, adding them to the chain and generating Bitcoin as a reward. People who produce Bitcoin are called miners. The miner who first validates the Bitcoin block is entitled to receive newly generated Bitcoins and transaction fees within the verified block. All transactions carried out on the Bitcoin blockchain are recorded from the first Bitcoin block. All transfers are anonymous but not completely confidential.
How is Bitcoin produced?
Bitcoin mining has been carried out by utilizing the processor power of the devices since the first Bitcoin block was produced. While the increase in the number of miners verifying Bitcoin transactions causes the need for more processing power, this affects Bitcoin mining in terms of speed, cost and difficulty.
CPU mining
In the early days of Bitcoin, users used to mine Bitcoin with their personal computers. It was possible to verify Bitcoin transactions using the power of the computers’ central processing unit (processor). As Bitcoin became popular and the number of miners increased, Bitcoin production became more difficult. When the cost of producing Bitcoin with the processors of the computers could not be met with the revenues from the production, users started to turn to different mining methods.
GPU mining
Mining performed with the processors of the graphics cards of the computers is called GPU mining. Since computers are faster and more powerful than their processors in solving mathematical problems, it has replaced CPU mining. In Bitcoin mining, devices called “Rig” are used by combining multiple graphics cards. However, when the processor power of the graphics cards became insufficient after a while, the miners needed more powerful processors.
ASIC mining
ASICs, defined as Application-Specific Integrated Circuits, are devices specifically manufactured for cryptocurrency mining. They generate Bitcoin more efficiently with higher capacity than any other type of processor. Due to the high processor capacities, ASIC mining consumes much more energy than other mining methods.
Cloud mining
It is an alternative mining service offered for users who do not have sufficient hardware, time and knowledge to mine. Users who want to mine can rent processor power from cloud mining services. Then, they can direct this power to the mining pool of their choice.
How to mine Bitcoin?
Bitcoin mining could be done with users’ personal computers in the early days when Bitcoin emerged. With the increase in the number of miners and the emergence of competition in Bitcoin mining, Bitcoin production began to be carried out with specially produced devices instead of users’ personal computers. Now, devices with special hardware are needed to perform Bitcoin mining. With these hardware, complex mathematical problems can be solved in the blockchain. As a result of each equation being solved, a new block is added to the blockchain network. Bitcoin mining is carried out by confirming transactions in the Bitcoin network and adding them to the blocks. As a result of this work, Bitcoin miners earn newly mined Bitcoins as a reward and the fees paid for transactions in the verified block.
When will Bitcoin mining be completed?
Miners are rewarded with Bitcoin for the effort spent verifying Bitcoin transfers. Bitcoin rewards earned by miners halve every 210,000 blocks (approximately every 4 years). This phenomenon is defined as block reward halving. Following the completion of the first block of Bitcoin in 2009, miners were rewarded with 50 Bitcoins for each block they verified. This reward, which is halved every 210,000 blocks, has dropped to 6.25 Bitcoins with the halving in May 2020. This halving cycle will occur 32 times until Bitcoin reaches its total supply. With a total supply of 21 million and more than 90% produced, it is expected that all of Bitcoin will be mined in 2140. The next halving will take place in 2024.
