You must be familiar with the bitcoin but do you know where the bitcoins come from? To meet the rising demand of the cryptocurrency in the market, you need to produce more and more bitcoins. But how? That’s where the concept of bitcoin mining comes in. The process of discovering and producing new bitcoins is called Mining. And there is a large number of bitcoin miners all over the world who are constantly trying to generate more and more bitcoins by solving mathematical problems on their computer using some advanced software tools. So without wasting any time, let’s discuss about the mining process in details.
What is Bitcoin Mining And How It Works?
To produce or mine a bitcoin, the miners use a special software tool to solve some typical mathematical problems. And in exchange of that, they are issued a certain number of bitcoins. The main idea is to create a new block which gets added to the existing blockchain. Each block contains a list of all the recent transactions happened within the bitcoin network. And the blockchain is a ledger of every block created since the very beginning of the network.But mining is not as simple as it sounds. Adding a new block to the blockchain is never easy. A bitcoin miner needs to show the proof of work in order to create a new block. Now the question arises, what is this proof of work? A proof of work or POW is a hash below a target value that can be obtained by performing a certain amount of force work. A hash is a simple way to represent a large amount of data in a compact and unique way. The bitcoin uses a hashing algorithm to produce a number in hexadecimal format. The algorithm used by bitcoin is SHA-256 which produces a 256 bit long number in hexadecimal format.
Pros Of The Bitcoin Mining
The miners play a prominent role in the bitcoin network. The miners not only produce a bitcoin but they also approve the transactions related to the bitcoins. So more miners means a more secure bitcoin network.For instance, whenever you send a bitcoin, the miners confirm this transaction and record the details in a public ledger. For every transaction that they confirm, they are rewarded with a certain amount of bitcoins and a transaction fee.The miner who completes a block first and add it to the network, gets additional rewards in terms of more bitcoins.
Difficulties With Bitcoin Mining
The SHA-256 hashing scheme is very quick. But creating a hash isn’t just enough. It is necessary to ensure that the hash produced is lower than the threshold set by the bitcoin network. Only then it can create a valid block. And if the hash produced by miner is above the threshold, then the miner has to try again. So in this way, the miner keeps on trying until a hash is found that is below the threshold. To make things worse, the threshold is varied every two weeks and every 2016 blocks.
Initially, whenever a bitcoin miner creates a block, he is rewarded 25 bitcoins. But this number is curtailed every four years. So as the time passes, the mining process is going to be even more difficult and less profitable.