Bitcoin Mining
By WILL KENTON
Updated Oct 1, 2020
What Is Bitcoin Mining?
Chances are you hear the phrase “bitcoin mining” and your mind begins to wander to the Western fantasy of pickaxes, dirt and striking it rich. As it turns out, that analogy isn’t too far off.
Bitcoin mining is performed by high-powered computers that solve complex computational math problems; these problems are so complex that they cannot be solved by hand and are complicated enough to tax even incredibly powerful computers.
KEY TAKEAWAYS
Bitcoin mining is the process of creating new bitcoin by solving a computational puzzle.
Bitcoin mining is necessary to maintain the ledger of transactions upon which bitcoin is based.
Miners have become very sophisticated over the last several years using complex machinery to speed up mining operations.
The result of bitcoin mining is twofold. First, when computers solve these complex math problems on the bitcoin network, they produce new bitcoin (not unlike when a mining operation extracts gold from the ground). And second, by solving computational math problems, bitcoin miners make the bitcoin payment network trustworthy and secure by verifying its transaction information.
When someone sends bitcoin anywhere, it's called a transaction. Transactions made in-store or online are documented by banks, point-of-sale systems, and physical receipts. Bitcoin miners achieve the same thing by clumping transactions together in “blocks” and adding them to a public record called the “blockchain.” Nodes then maintain records of those blocks so that they can be verified into the future.
When bitcoin miners add a new block of transactions to the blockchain, part of their job is to make sure that those transactions are accurate. In particular, bitcoin miners make sure that bitcoin is not being duplicated, a unique quirk of digital currencies called “double-spending.” With printed currencies, counterfeiting is always an issue. But generally, once you spend $20 at the store, that bill is in the clerk’s hands. With digital currency, however, it's a different story.
Digital information can be reproduced relatively easily, so with Bitcoin and other digital currencies, there is a risk that a spender can make a copy of their bitcoin and send it to another party while still holding onto the original.1
Special Considerations
Rewarding Bitcoin Miners
With as many as 300,000 purchases and sales occurring in a single day, verifying each of those transactions can be a lot of work for miners.2 As compensation for their efforts, miners are awarded bitcoin whenever they add a new block of transactions to the blockchain.
The amount of new bitcoin released with each mined block is called the "block reward." The block reward is halved every 210,000 blocks (or roughly every 4 years). In 2009, it was 50. In 2013, it was 25, in 2018 it was 12.5, and in May of 2020, it was halved to 6.25.
Bitcoin successfully halved its mining reward—from 12.5 to 6.25—for the third time on May 11th, 2020.
This system will continue until around 2140.3 At that point, miners will be rewarded with fees for processing transactions that network users will pay. These fees ensure that miners still have the incentive to mine and keep the network going. The idea is that competition for these fees will cause them to remain low after halvings are finished.
These halvings reduce the rate at which new coins are created and, thus, lower the available supply. This can cause some implications for investors, as other assets with low supply—like gold—can have high demand and push prices higher. At this rate of halving, the total number of bitcoin in circulation will reach a limit of 21 million, making the currency entirely finite and potentially more valuable over time.3
Verifying Bitcoin Transactions
In order for bitcoin miners to actually earn bitcoin from verifying transactions, two things have to occur. First, they must verify one megabyte (MB) worth of transactions, which can theoretically be as small as one transaction but are more often several thousand, depending on how much data each transaction stores.
Second, in order to add a block of transactions to the blockchain, miners must solve a complex computational math problem, also called a "proof of work." What they're actually doing is trying to come up with a 64-digit hexadecimal number, called a "hash," that is less than or equal to the target hash. Basically, a miner's computer spits out hashes at different rates—megahashes per second (MH/s), gigahashes per second (GH/s), or terahashes per second (TH/s)—depending on the unit, guessing all possible 64-digit numbers until they arrive at a solution. In other words, it's a gamble.
The difficulty level of the most recent block as of August 2020 is more than 16 trillion. That is, the chance of a computer producing a hash below the target is 1 in 16 trillion. To put that in perspective, you are about 44,500 times more likely to win the Powerball jackpot with a single lottery ticket than you are to pick the correct hash on a single try. Fortunately, mining computer systems spit out many hash possibilities. Nonetheless, mining for bitcoin requires massive amounts of energy and sophisticated computing operations.
The difficulty level is adjusted every 2016 blocks, or roughly every 2 weeks, with the goal of keeping rates of mining constant.4 That is, the more miners there are competing for a solution, the more difficult the problem will become. The opposite is also true. If computational power is taken off of the network, the difficulty adjusts downward to make mining easier.
Bitcoin Mining Analogy
Say I tell three friends that I'm thinking of a number between 1 and 100, and I write that number on a piece of paper and seal it in an envelope. My friends don't have to guess the exact number, they just have to be the first person to guess any number that is less than or equal to the number I am thinking of. And there is no limit to how many guesses they get.
Let's say I'm thinking of the number 19. If Friend A guesses 21, they lose because 21>19. If Friend B guesses 16 and Friend C guesses 12, then they've both theoretically arrived at viable answers, because 16<19 and 12<19. There is no 'extra credit' for Friend B, even though B's answer was closer to the target answer of 19.
Now imagine that I pose the 'guess what number I'm thinking of' question, but I'm not asking just three friends, and I'm not thinking of a number between 1 and 100. Rather, I'm asking millions of would-be miners and I'm thinking of a 64-digit hexadecimal number. Now you see that it's going to be extremely hard to guess the right answer.
Not only do bitcoin miners have to come up with the right hash, but they also have to be the first to do it.
Because bitcoin mining is essentially guesswork, arriving at the right answer before another miner has almost everything to do with how fast your computer can produce hashes. Just a decade ago, bitcoin mining could be performed competitively on normal desktop computers. Over time, however, miners realized that graphics cards commonly used for video games were more effective and they began to dominate the game. In 2013, bitcoin miners started to use computers designed specifically for mining cryptocurrency as efficiently as possible, called Application-Specific Integrated Circuits (ASIC). These can run from several hundred dollars to tens of thousands but their efficiency in mining Bitcoin is superior.
Today, bitcoin mining is so competitive that it can only be done profitably with the most up-to-date ASICs. When using desktop computers, GPUs, or older models of ASICs, the cost of energy consumption actually exceeds the revenue generated. Even with the newest unit at your disposal, one computer is rarely enough to compete with what miners call "mining pools."
A mining pool is a group of miners who combine their computing power and split the mined bitcoin between participants. A disproportionately large number of blocks are mined by pools rather than by individual miners. Mining pools and companies have represented large percentages of bitcoin's computing power.
Bitcoin vs. Traditional Currencies
Consumers tend to trust printed currencies. That’s because the U.S. dollar is backed by a central bank of the U.S., called the Federal Reserve. In addition to a host of other responsibilities, the Federal Reserve regulates the production of new money, and the federal government prosecutes the use of counterfeit currency.5 6
Even digital payments using the U.S. dollar are backed by a central authority. When you make an online purchase using your debit or credit card, for example, that transaction is processed by a payment processing company (such as Mastercard or Visa). In addition to recording your transaction history, those companies verify that transactions are not fraudulent, which is one reason your debit or credit card may be suspended while traveling.
Bitcoin, on the other hand, is not regulated by a central authority. Instead, bitcoin is backed by millions of computers across the world called “nodes.” This network of computers performs the same function as the Federal Reserve, Visa, and Mastercard, but with a few key differences. Nodes store information about prior transactions and help to verify their authenticity. Unlike those central authorities, however, bitcoin nodes are spread out across the world and record transaction data in a public list that can be accessed by anyone.
History of Bitcoin Mining
Between 1 in 16 trillion odds, scaling difficulty levels, and the massive network of users verifying transactions, one block of transactions is verified roughly every 10 minutes.4 But it’s important to remember that 10 minutes is a goal, not a rule.
The bitcoin network is currently processing just under four transactions per second as of August 2020, with transactions being logged in the blockchain every 10 minutes.7 For comparison, Visa can process somewhere around 65,000 transactions per second.8 As the network of bitcoin users continues to grow, however, the number of transactions made in 10 minutes will eventually exceed the number of transactions that can be processed in 10 minutes. At that point, waiting times for transactions will begin and continue to get longer, unless a change is made to the bitcoin protocol.
This issue at the heart of the bitcoin protocol is known as “scaling.” While bitcoin miners generally agree that something must be done to address scaling, there is less consensus about how to do it. There have been two major solutions proposed to address the scaling problem. Developers have suggested either (1) creating a secondary "off-chain" layer to Bitcoin that would allow for faster transactions that can be verified by the blockchain later, or (2) increasing the number of transactions that each block can store. With less data to verify per block, the Solution 1 would make transactions faster and cheaper for miners. Solution 2 would deal with scaling by allowing for more information to be processed every 10 minutes by increasing block size.
In July 2017, bitcoin miners and mining companies representing roughly 80% to 90% of the network’s computing power voted to incorporate a program that would decrease the amount of data needed to verify each block.
The program that miners voted to add to the bitcoin protocol is called a segregated witness, or SegWit. This term is an amalgamation of Segregated, meaning “to separate,” and Witness, which refers to “signatures on a bitcoin transaction.” Segregated Witness, then, means to separate transaction signatures from a block — and attach them as an extended block. While adding a single program to the bitcoin protocol may not seem like much in the way of a solution, signature data has been estimated to account for up to 65% of the data processed in each block of transactions.
Less than a month later in August 2017, a group of miners and developers initiated a hard fork, leaving the bitcoin network to create a new currency using the same codebase as bitcoin. Although this group agreed with the need for a solution to scaling, they worried that adopting segregated witness technology would not fully address the scaling problem.
Instead, they went with Solution 2. The resulting currency, called “bitcoin cash,” increased the blocksize to 8 MB in order to accelerate the verification process to allow a performance of around 2 million transactions per day. On August 16, 2020, Bitcoin Cash was valued at about $302 to Bitcoin’s roughly $11,800.
bitcoin stock bitcoin freebitcoin
q bitcoin
asic monero bitcoin государство ethereum описание bitcoin ruble bitcoin отзывы tether addon fpga ethereum
get bitcoin биржи ethereum
ethereum бесплатно bitcoin торговля сбербанк bitcoin обмен ethereum bitcoin expanse day bitcoin
bitcoin best
poloniex ethereum sportsbook bitcoin bitcoin криптовалюта scrypt bitcoin
bitcoin rotator bitcoin миллионеры курс bitcoin создатель bitcoin зарегистрировать bitcoin карты bitcoin
bitcoin conference bitcoin начало cryptocurrency magazine The response to this issue is mining pools. Mining pools are worked by outsiders and facilitate gatherings of miners. By cooperating in a pool and sharing the payouts among members, excavators can get an enduring stream of bitcoin beginning the day they enact their digger. Measurements on a portion of the mining pools can be seen on Blockchain.info.sberbank bitcoin A Guide to Becoming a Blockchain DeveloperDOWNLOAD NOWBlockchain Career Guidebitcoin комбайн bitcoin lurkmore использование bitcoin
day bitcoin фото bitcoin bitcoin markets monero краны сложность monero bitcoin telegram блок bitcoin miningpoolhub ethereum poloniex monero ethereum mist bitcoin инструкция bitcoin информация spin bitcoin скрипт bitcoin Ключевое слово россия bitcoin скачать bitcoin bitcoin ваучер сложность bitcoin bitcoin gif bitcoin даром project ethereum bitcoin минфин mercado bitcoin best bitcoin bitcoin golden приложение tether bitcoin bbc купить bitcoin forum cryptocurrency контракты ethereum auto bitcoin eDonkeyregistration bitcoin Imagine two people are making a money transaction. Now, assuming the sender has properly sent the money from his bank, there’s no chance the transaction will fail, right?Emptiness is the Middle Way between existent and nonexistentbitcoin ваучер технология bitcoin bitcoin клиент cryptocurrency top rbc bitcoin bitcoin акции ethereum serpent форумы bitcoin получить bitcoin заработок bitcoin bitcoin forum ethereum капитализация bitcoin joker china bitcoin
bitcoin рост shot bitcoin баланс bitcoin ethereum алгоритм kupit bitcoin bitcoin лого chain bitcoin bitcoin цена loans bitcoin clicker bitcoin iso bitcoin
monero ico zcash bitcoin monero xeon ethereum пулы monero обменять ios bitcoin шахта bitcoin reward bitcoin car bitcoin finex bitcoin bitcoin scam ethereum кошелька ethereum упал bitcoin scanner андроид bitcoin tether android fire bitcoin bitcoin теханализ ico monero bitcoin зебра ethereum токен ecdsa bitcoin tether usd bitcoin haqida сложность ethereum розыгрыш bitcoin новости ethereum bitcoin отследить bitcoin mmgp bitcoin куплю bitcoin таблица bitcoin suisse bitcoin робот bitcoin flip bitcoin slots bitcoin основы ethereum plasma
зарабатывать bitcoin bitcoin background bitcoin новости bitcoin торги bitcoin cnbc box bitcoin transactions bitcoin plus500 bitcoin bitcoin эмиссия monero cryptonight bitcoin регистрация currency bitcoin platinum bitcoin casascius bitcoin bitcoin заработок love bitcoin cryptocurrency market ethereum токены обменники bitcoin ethereum обменять
реклама bitcoin bitcoin заработок bitcoin вики bitcoin 2048 ethereum studio Each new block and the chain as a whole must be agreed upon by every node in the network. This is so everyone has the same data. For this to work, blockchains need a consensus mechanism.bitcoin london bitcoin кошелька ethereum bitcoin bitcoin magazine
ethereum windows bitcoin обзор торги bitcoin рубли bitcoin порт bitcoin проект bitcoin bitcoin preev sberbank bitcoin okpay bitcoin machine bitcoin live bitcoin ethereum упал collector bitcoin bitcoin лохотрон
rigname ethereum gek monero value bitcoin куплю ethereum bitcoin word bitcoin base майнинг monero bistler bitcoin ethereum mist bitcoin usb разработчик ethereum кран ethereum ethereum serpent bitcoin блог bitcoin data обновление ethereum калькулятор bitcoin amazon bitcoin
bitcoin pools bitcoin 2018 china bitcoin bitcoin вконтакте tether 4pda
cudaminer bitcoin bitcoin golden bitcoin favicon abc bitcoin
bitcoin анимация bitcoin me monero криптовалюта bitcoin зарегистрироваться количество bitcoin bitcoin китай bye bitcoin future bitcoin ethereum geth bitcoin spend bitcoin арбитраж ethereum poloniex
reindex bitcoin bitcoin расчет aml bitcoin bitcoin япония ферма bitcoin collector bitcoin bitcoin аналоги
san bitcoin рубли bitcoin мавроди bitcoin bitcoin сигналы bitcoin alliance bitcoin best stealer bitcoin buy ethereum nodes bitcoin bitcoin лучшие logo ethereum bitcoin pdf bitcoin de wmx bitcoin bitcoin neteller billionaire bitcoin доходность ethereum
ethereum получить bitcoin книга bitcoin currency demo bitcoin генераторы bitcoin bitcoin update кредиты bitcoin запрет bitcoin xbt bitcoin buy tether сайте bitcoin bitcoin hashrate
bitcoin миксеры bitcoin фарминг ethereum обменники asus bitcoin trading cryptocurrency bitcoin сегодня bitcoin haqida
ethereum transactions bitcoin donate торрент bitcoin bitcoin apple bitcoin options bitcoin etherium network bitcoin programming bitcoin cryptocurrency price bitcoin alien hashrate ethereum boom bitcoin json bitcoin ethereum логотип dark bitcoin дешевеет bitcoin ethereum twitter bitcoin vpn boom bitcoin
bitcointalk ethereum panda bitcoin bitcoin greenaddress Market CapitalizationIf you compare the profitability analyses for a CPU, a GPU and an ASIC, you will see that the costs of CPU and GPU mining largely exceed the rewards, and even with free electricity the profits are so small that they are hardly worth the effort.ethereum logo weather bitcoin Are easy to protect and hide. Can be stored on a phone, computer, encrypted on a paper backup or memorized in your head.bitcoin бизнес bitcoin cash bitcoin asics ethereum обменять компиляция bitcoin wei ethereum сети bitcoin bitcoin pizza bitcoin nachrichten ethereum coin check bitcoin
cryptocurrency logo nxt cryptocurrency ethereum купить bitcoin установка flypool ethereum bitcoin all bitcoin spinner A 'fork,' in programming terms, is an open-source code modification. Usually the forked code is similar to the original, but with important modifications, and the two 'prongs' comfortably co-exist. Sometimes a fork is used to test a process, but with cryptocurrencies, it is more often used to implement a fundamental change, or to create a new asset with similar (but not equal) characteristics as the original.Now, as we’re all newbies here. Here’s the blockchain for dummies:ethereum casino
calculator ethereum
bitcoin exe bitcoin price bitcoin coinmarketcap
block bitcoin bitcoin neteller яндекс bitcoin bitcoin rpg bitcoin торговать tera bitcoin monero новости bitcoin история poloniex ethereum выводить bitcoin Initial coin offeringsProportional mining pools are among the most common. In this type of pool, miners contributing to the pool's processing power receive shares up until the point at which the pool succeeds in finding a block. After that, miners receive rewards proportional to the number of shares they hold.шифрование bitcoin bitcoin анонимность nodes bitcoin bitcoin рублях wallets cryptocurrency bitcoin pizza стоимость ethereum bitcoin форки all bitcoin отзыв bitcoin эмиссия ethereum bitcoin программирование bitcoin виджет
reddit bitcoin to bitcoin locals bitcoin магазин bitcoin wild bitcoin bitcoin services reddit ethereum bitcoin удвоитель gadget bitcoin explorer ethereum cryptocurrency nem bitcoin green bye bitcoin bitcoin apple расшифровка bitcoin connect bitcoin bitcoin fpga ethereum dao динамика ethereum bitcoin презентация check bitcoin
ethereum zcash bitcoin instant bitcoin майнить яндекс bitcoin bitcoin компания get bitcoin bitcoin greenaddress фермы bitcoin moneypolo bitcoin bitcoin click bitcoin pay bitcoin cz bitcoin xpub anomayzer bitcoin play bitcoin bitcoin png goldsday bitcoin okpay bitcoin bitcoin farm bitcoin рухнул black bitcoin raiden ethereum atm bitcoin миксер bitcoin mainer bitcoin blog bitcoin bitcoin информация txid bitcoin принимаем bitcoin миксеры bitcoin
3 bitcoin ethereum news bitcoin config bitcoin click bitcoin mine auction bitcoin bitcoin создать bitcoin ios vector bitcoin криптокошельки ethereum market bitcoin bitcoin gif token bitcoin
bitcoin xl lealana bitcoin bitcoin обои
кошельки bitcoin mist ethereum mercado bitcoin importprivkey bitcoin
ethereum myetherwallet валюта bitcoin polkadot sberbank bitcoin график ethereum
вики bitcoin ethereum скачать блок bitcoin банкомат bitcoin invest bitcoin
ethereum биткоин bitcoin аккаунт bitcoin capital bitcoin bloomberg balance bitcoin bitcoin смесители блокчейна ethereum bitcoin arbitrage ebay bitcoin взлом bitcoin bitcoin landing bitcoin gift
monero обменять bitcoin lottery
claymore ethereum bitcoin баланс bitcoin evolution
tether приложения trade cryptocurrency bitcoin rotator
ethereum pow розыгрыш bitcoin monero transaction micro bitcoin обменники bitcoin bitcoin motherboard bitcoin мошенники ubuntu ethereum криптовалюта tether отзыв bitcoin
tether iphone bitcoin change bitcoin stellar plasma ethereum bitcoin site ethereum siacoin bitcoin golden ethereum gold api bitcoin bitcoin green bitcoin torrent ethereum калькулятор cryptocurrency calendar bitcoin минфин accepts bitcoin alliance bitcoin bitcoin rt bitcoin коллектор книга bitcoin bitcoin обмен bitcoin okpay monero курс monero hashrate
форки ethereum bitcoin bux bitcoin оборот
развод bitcoin ethereum txid курсы ethereum bitcoin frog bitcoin alliance tether yota ethereum конвертер bitcoin shops bitcoin community bitcoin matrix reklama bitcoin 2 bitcoin adc bitcoin ethereum myetherwallet casper ethereum cryptocurrency rates
bitcoin statistics ethereum википедия bitcoin сложность bitcoin service взлом bitcoin buying bitcoin secp256k1 bitcoin token bitcoin bitcoin adress cryptocurrency это майн ethereum bitcoin donate
bitcoin работа bye bitcoin е bitcoin зарабатываем bitcoin mindgate bitcoin 33 bitcoin
plasma ethereum bitcoin paypal bitcoin now conference bitcoin
bitcoin kazanma tera bitcoin monero майнить ethereum рубль
split bitcoin bitcoin s bitcoin online swarm ethereum webmoney bitcoin cryptocurrency tech bitcoin ocean обменник ethereum tether криптовалюта map bitcoin bear bitcoin bitcoin haqida bitcoin кошельки конец bitcoin bitcoin services rx580 monero bitcoin hacking
bitcoin register bitcoin abc краны monero шахта bitcoin polkadot su doge bitcoin mmm bitcoin ethereum конвертер bitcoin bbc tp tether bitcoin trader
краны monero
кран bitcoin bitcoin advcash usd bitcoin зарегистрироваться bitcoin проекта ethereum pplns monero short bitcoin куплю bitcoin
казахстан bitcoin bitcoin сокращение
bitcoin analysis coinmarketcap bitcoin
putin bitcoin доходность bitcoin ethereum markets bitcoin переводчик cryptocurrency nem bitcoin wallpaper ethereum forks dwarfpool monero котировки ethereum ethereum bitcoin database видео bitcoin
bitcoin лотерея ethereum decred mine ethereum coin ethereum bitcoin форки
daemon monero monero fork новости ethereum карты bitcoin динамика ethereum bitcoin информация обмен tether
выводить bitcoin dwarfpool monero monero amd tether приложение вывод ethereum talk bitcoin bitcoin obmen ethereum скачать bitcoin ruble bitcoin гарант ethereum телеграмм bitcoin usd bitcoin java elena bitcoin bitcoin banking cryptocurrency arbitrage value bitcoin bitcoin step bitcoin сборщик обновление ethereum wild bitcoin top bitcoin nanopool ethereum reddit bitcoin mikrotik bitcoin bitcoin биржа bitcoin часы bitcoin neteller bitcoin tube bitcoin shops tether app The credit checking agency, Equifax, lost more than 140,000,000 of its customers' personal details in 2017.According to IMF, a properly executed CBDC can counter new digital currencies. Privately-issued digital currencies can be a regulatory nightmare. A domestically-issued CBDC which is, denominated in the domestic unit of account, would help counter this problem.agario bitcoin bitcoin форум mini bitcoin bitcoin flapper bitcoin matrix cgminer monero ethereum erc20 etf bitcoin bitcoin видеокарты bitcoin converter bitcoin webmoney bitcoin history monero купить bitcoin brokers
bitcoin ticker разделение ethereum серфинг bitcoin bitcoin nachrichten
bitcoin instagram статистика ethereum ethereum exchange bistler bitcoin bitcoin шахты alien bitcoin bitcoin girls bcc bitcoin tether приложения bitcoin amazon fun bitcoin bitcoin loan bitcoin сбор зебра bitcoin android tether пример bitcoin asus bitcoin bitcoin png decred cryptocurrency bitcoin galaxy биржи ethereum wikipedia ethereum difficulty bitcoin bitcoin earning bitcoin лопнет ethereum падение tcc bitcoin bitcoin программирование bitcoin протокол bitcoin forex
отзыв bitcoin bitcoin sha256 капитализация bitcoin bitcoin earn bitcoin database As of Jan. 15, 2021, Monero was trading at $155.94 and had a market capitalization of $2.778 billion. That's a stark difference from the closing price of $65.68 on Jan. 15, 2020. The market cap on that date was $1.143 billion.2 That's a jump of more than 137%.bitcoin перспективы bitcoin king bitcoin мерчант galaxy bitcoin ninjatrader bitcoin register bitcoin why cryptocurrency
bitcoin история ethereum chart bitcoin сложность bitcoin серфинг In 2013, Mark Gimein estimated electricity consumption to be about 40.9 megawatts (982 megawatt-hours a day). In 2014, Hass McCook estimated 80.7 megawatts (80,666 kW). As of 2015, The Economist estimated that even if all miners used modern facilities, the combined electricity consumption would be 166.7 megawatts (1.46 terawatt-hours per year). The Cambridge Bitcoin Electricity Consumption Index estimates the energy use of the bitcoin network grew from 1.95 terawatt-hours per year at the end of 2014, to 77.1 terawatt-hours per year by the end of 2019.A question that often comes up is: what’s in it for the miners? Well, they get rewarded with XMR coins each time they verify a transaction on the Monero network. Every time they use their resources to validate a group of transactions (called blocks), they are rewarded with brand new Monero coins!андроид bitcoin