DailyBubble News
DailyBubble News

How Does Bitcoin Mining Work? – Forbes Advisor


Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.

In 2021, Tesla stopped taking Bitcoin for electric vehicle purchases. Why? Concern for the environmental toll of creating new units of the world’s best-known cryptocurrency in a process called mining.

The computers that mint new Bitcoin use a tremendous amount of electricity, often generated by fossil fuels. That real-world cost of electricity is one of the factors that give real-world value to the digital currency, which is currently trading at around $23,600.

Regardless of the source of electricity, and the cryptocurrency mining industry is moving toward renewable energy sources, mining is central to Bitcoin’s existence as a decentralized currency.

Whether you’re considering buying Bitcoin outright, mining it yourself or investing in the companies that mine it or make mining equipment, you’ll first want to understand what Bitcoin mining is in the first place.

What Is Bitcoin Mining?

Bitcoin mining refers to the process where a global network of computers running the Bitcoin code work to ensure that transactions are legitimate and added correctly to the cryptocurrency’s blockchain. Mining is also how new Bitcoin is entered into circulation.

“Bitcoin mining is what makes the Bitcoin network secure,” says Stefan Ristić, owner of the educational website BitcoinMiningSoftware.com.

High-powered computers compete to be the first to validate a series of transactions called a block, and add the block to the blockchain.

Miners are paid transaction fees and 6.25 BTC per block for their efforts (if they solve the block correctly). That’s around $147,000 at today’s prices.

“The mining, or transaction processing, is accomplished by incredibly expensive and powerful computers whose sole function is to run algorithms to solve the mathematical problem that allows their owner to win a Bitcoin block—and the revenue that comes with it,” says Richard Baker, CEO of miner and blockchain services provider TAAL Distributed Information Technologies.

How Does Bitcoin Mining Work?

Verifying Bitcoin transactions and recording them on the blockchain involves solving complex algorithms. This is all part of Bitcoin’s proof of work consensus mechanism, which aims to add a new block every 10 minutes.

The more computing power a miner has, the more likely it is to win blocks.

“They have a chance to earn Bitcoin every 10 minutes based on how much computing power they use,” says Bruce Fenton, CEO of fintech company Chainstone Labs.

The latest Bitcoin mining machines use application-specific integrated circuits (ASICs) specifically programmed for Bitcoin mining to deal with all the computing power needed, explains Patricia Trompeter, CEO of cryptocurrency miner Sphere 3D Corp.

The current generation of these dedicated Bitcoin mining rigs generate possible answers to the Bitcoin block equations at around 100 trillion hashes per second, says Rob Chang, CEO of Gryphon Digital Mining, a privately held Bitcoin miner.

A Bitcoin Hash is a mining measurement of the amount of computing power used on the network to process transactions.

How to Mine Bitcoin

Since Bitcoin was released in 2009, the energy required to produce the cryptocurrency has increased as the network raises the mining difficulty to keep the flow of new blocks of transactions steady even as more miners get involved.

Bitcoin mining is usually a large-scale commercial affair done by companies using data centers with purpose-built servers. Mining farms can have many mining computers held in warehouses.

“The input that determines whether such activities are profitable is the cost of electricity to power the mining computers,” says David Weisberger, CEO of trading platform CoinRoutes.

Because of this, farms are often located near energy sources like dams, oil and gas wells, solar farms or geothermal sources.

“The more network participants, the higher the difficulty gets,” says Jagdeep Sidhu, president of Syscoin Foundation, which represents the open-source blockchain project Syscoin.

How to Mine Bitcoin at Home

High costs put home miners at a disadvantage to institutional miners, who can source low-cost power and save money with bulk purchases of Bitcoin mining rigs.

“Although there are home operators who have Bitcoin mining operations in their residences, the process of mining has become both expensive and…



Read More: How Does Bitcoin Mining Work? – Forbes Advisor

Comments are closed.