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So, what is Bitcoin mining? Want to learn all about altcoins like Litecoin , or Ethereum? We have guides for those too. Cryptocurrency mining in general, and specifically Bitcoin, can be a complicated topic. But it can be boiled down to a simple premise: That software forces the system to complete complicated calculations — imagine them digging through layers of digital rock — and if all goes to plan, the miners are rewarded some Bitcoin at the end of their toils.

Mining is a risky process though. It not only takes heavy lifting from the mining chips themselves, but boatloads of electricity, powerful cooling, and a strong network connection. Bitcoin works differently from traditional currencies. Where dollars and pounds are handled by banks and financial institutions which collectively confirm when transactions occur, Bitcoin operates on the basis of a public ledger system.

In order for transactions to be confirmed — to avoid the same Bitcoin from being spent twice, for example — a number of Bitcoin nodes, operated by miners around the world, need to give it their seal of approval. For that, they are rewarded the transaction fees paid by those conducting them and while there are still new Bitcoins to be made — there are currently more than In taking part in mining, miners create new Bitcoins to add to the general circulation, whilst facilitating the very transactions that make Bitcoin a functional cryptocurrency.

Prospective miners download and run bespoke mining software — of which there are several popular options — and often join a pool of other miners doing the same thing. That involves the mining hardware taking a huge number of guesses at a particular integer over and over until they find the correct one. The individual miner or pool who are the first to create the proof of work for a block are rewarded with transaction fees for those confirmed transactions and a subsidy of Bitcoin.

That subsidy is made up of brand new Bitcoin which are generated through the process of mining. That will continue to happen until all 21 million have been mined. There is no guarantee that any one miner or mining pool will generate the correct integer needed to confirm a block and thereby earn the reward.

Bitcoin was originally designed to allow anyone to take part in the mining process with a home computer and thereby enjoy the process of mining themselves, receiving a reward on occasion for their service. ASIC miners have made that impossible for anyone unable to invest thousands of dollars and utilize cheap and plentiful electricity. Although hardware has pushed many miners out of the practice though, there are safeguards in place that prevent all remaining Bitcoins being mined in a short period of time.

Every 2, blocks — at a rate of six blocks an hour, roughly every two weeks — the mining difficulty is recalculated. Mostly it increases as more miners and mining hardware join the network, but if the overall mining power were to reduce, then the difficulty would decrease to maintain a roughly minute block-generation time.

The purpose of that relatively hard minute time is because that way the number of Bitcoins being generated by the process will be slow and steady and mostly controlled. That is compounded by the reduction in reward for blocks mined every , blocks.

Each time that threshold is reached, the reward is halved. In early mining a block rewards In the future as mining rewards decrease, the transaction rewarded to miners will make up a larger percentage of miner income. At the rate with which Bitcoin mining difficulty is increasing, mining hardware is progressing, and rewards are decreasing, projections for the final Bitcoins being mined edge into the 22nd century.

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