Mom, where do bitcoins come from? Explained bitcoin mining

“Mom, where do bitcoins come from?” Well, do you see when a shiny young bitcoin attracts the eyes of an ambitious miner and because they love each other very much …

Wait, this is obviously too difficult to solve here. Besides, my whole goal is to make things easier. However, bitcoins are made by solving complex mathematical problems. This is done by a powerful machine that is designed to solve these mathematical problems. This process is called extraction. The people who own these machines to make money by mining bitcoins are called miners. When a batch of problems is solved, it becomes known as a block. Blocks are checked by other users and once checked, they are added to what is called a blockchain. This chain continues to grow, with a new block being added approximately every 10 minutes. This chain is truly a general ledger that will continue to grow and never end.

The very powerful machines that extract, power a lot of energy and increase the monthly utility bill for utilities. The reason it takes so much power is the genius of the math involved. It requires the digging machine to perform complex cryptographic algorithms. Once the math problem is solved by the machine, a block of coins is born. Each time 210,000 blocks are created, the miner’s reward is halved. It takes 4 years to achieve this. So it’s kind of like a bitcoin olympics. Currently, the prize for the block is 12 bitcoins (on June 23, 2020 the prize will be only 6 coins). These coins go to the miner, whose machine at that time was the lucky winner in the lottery. There is a winner every 10 minutes. There are also many miners who also compete. The said miner now has something valuable. My enough coins and you pay your electricity bill and then a little.

There is another way for mine. It’s called cloud yield. With this type of digging you pay to use someone else’s network and this significantly reduces your profits. The advantages of this method are that it does not require the use of electricity or even the purchase of a machine.

Sounds good to me. I want to start digging now. Is it a good idea and can I generate regular passive income? Probably. Hold on tight for now and you can call later.

Let’s try to break this.

Going back to the original way of machine digging, you will have to start with the purchase of a quality mining machine. That would cost you about $ 2,000. Here is a picture of a good machine (Antminer S9 from Bitmain), capable of creating a high hashing speed of 14 TH / s. 1 TH / s is 1,000,000,000,000 hashes per second. This machine does 14 times more than that. This is a very hashing force. The hash is just a really long number that the machine creates each time trying to solve the algorithm. Again, to use my lottery analogy, all of these machines are there, mingling with the hope of being the next winner.

Then your chances of winning become more difficult with more competition. A further complication of this question is that each time a mathematical problem is solved, the next problem gradually becomes more difficult to solve. The difficulty 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, we can never dig another bitcoin again. However, the blockchain itself will continue to expand because it is used to verify every transaction or purchase.

Remember that nickname Satoshi Nakamoto, about whom I also wrote? Did you know that today’s math problems are over 70,000 times more difficult to solve than machines than we were, he dug up the 1st bitcoin back in 2009 ?! The final coin is projected to be mined in 2140, as the system is halved every four years (210,000 blocks). 16,400,000 coins (78%) have already been mined and each coin will henceforth be mined at a much lower rate. Yes, you read that right. In principle, 80% is extracted in the first 8 years and it will take more than 100 years to extract the last 20%. If any of my great, great, great-grandchildren read this, I hope you are sitting beautifully with our family’s bitcoins, which are now valued at 220,000 for bitcoin. We can all dream right!

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

By the way, a great place to see all the cryptocurrencies out there and their common coins and market capitalization, Coin Market Cap is a great resource. You can see all 700 plus flying night altcoins out there. Altcoin is just another way to call any cryptocurrency coin that is not bitcoin. You probably already know that Bitcoin is like the Rose Bowl, the grandfather of them all! I would really try to limit my focus and research to the top 10 for now. Not that now there will be no success stories from any of the almost useless. Just finding one is like choosing the right penny. Sticking to established companies that are recognized by key analysts is a much safer game. The same goes for the stock market you use to buy, sell and trade. That’s why I use Coinbase to make my trades, as they are the most reliable, secure and convenient exchange. They also have the most in-depth verification process when it comes to adding altcoins.

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

-Bitcoins are created by extraction

-Selection is performed by powerful machines that solve complex mathematical problems. You can also buy contracts called cloud mining if you don’t want to buy a machine.

– The problems are becoming more difficult as coins are mined and the pace of production slows down

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

-On June 23, 2020, this will again be halved to only 6, created every 10 minutes

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

-Competition among miners and increasingly complex mathematical problems make it difficult to make a profit

-The final coin is expected to be mined in 2140