Bitcoin mining, in its simplest definition, is the process of generating bitcoin (BTC) by solving various mathematical puzzles. Transactions on the Bitcoin (BTC) blockchain are verified by Bitcoin mining, completed and added to the chain as a new block. In other words, Bitcoin mining ensures the security and sustainability of the blockchain as well as producing bitcoin.
Crypto mining is run by nodes that use the computational powers of their computers to solve mathematical puzzles. These nodes are called “miners”. The first bitcoin miner to solve the puzzle confirms the transaction and adds a new block to the Bitcoin blockchain. The user gets rewarded with a number of Bitcoins (BTC) for this application. Following the application, new amount of Bitcoin gets into the market and it can be used by everyone immediately. This process can also be defined as the “Proof of Work” which is the common mechanism of the Bitcoin Block Chain.
How Does Bitcoin Mining Work?
Bitcoin mining is done through the supply and the power of computers. This computing power is based on the processing power (CPU) of the relevant hardware which can be found and assembled by everyone. Using the computational power of their computers, Bitcoin miners solve mathematical puzzles created by the Bitcoin algorithm and verify transactions. In return, they earn a BTC reward, known as a block reward or mining reward. Thus, they produce new bitcoins that are used simultaneously.
Bitcoin transactions and the exchanges are aggregated into blocks that are added to a database called the blockchain, which can be defined as the basis of the Crytpo technology. Full nodes in the Bitcoin network keep track of the blockchain and verify transactions that occur on it. Bitcoin miners download the entire history of the blockchain and combine current transactions into one block.
By solving computational math problems, Bitcoin miners also verify transaction information and make the Bitcoin network reliable. The idea behind verifying Bitcoin transaction information is to prevent double-spending or malicious transactions.
Crypto mining was originally done on individual desktop computers with regular central processing units (CPUs). But as the network grew and the number of transactions on the network increased, this method became very slow. Today, Bitcoin mining is done using large mining pools spread over many geographies and many mining companies have emerged.
Bitcoin Mining and Energy
The energy consumption of the Bitcoin network has been the subject of debate since its launch in 2009. Bitcoin mining is energy-intensive, as it relies on the computational power of computers. This makes Bitcoin mining activity costly. This can be said fort he general application of Crypto mining.
On the other hand, Bitcoin mining is also discussed in terms of its impact on the environment. For a long time, Bitcoin miners consumed energy based on fossil fuels. This has many negative effects on the environment. So much so that the annual energy consumption of Bitcoin is above the energy consumption of many countries, and due to its high carbon footprint, Bitcoin is referred to as “dirty currency” by environmentalists.
Today, however, Bitcoin mining has also started to benefit from renewable energy sources. Mining companies are trying to reduce the negative impact of Bitcoin on the environment by establishing Bitcoin mining facilities in countries where renewable energy sources are concentrated. This, can mean that the new financial system of Blockchain, Crypto and different types of exchanges, will change the world for good.
The Reward of Crypto Mining
Bitcoin mining is rewarded with a reward system called a block reward or mining reward. The first Bitcoin miner to verify a transaction and generate a new block and add it to the chain is rewarded with a certain amount of BTC.
For every 210 thousand BTC produced, Bitcoin mining rewards are halved. This process is called halving. When the Bitcoin blockchain launched in 2009, the mining reward was 50 BTC. Today, Bitcoin mining is rewarded with 6.5 BTC.
Is Crypto Mining Legal?
One of the most wondered issues about cryptocurrency mining is whether it is legal or not. Cryptocurrency mining is common all over the world. It is not a prohibited transaction in any region. Each individual can start digging legally and earn profits with the mining methods of his/her choice. Another known mining method is GPU mining. The reason why GPU mining is so popular is that it is efficient and the cost is very low.
When BTC reached higher numbers in value in all around the world, more and more people started to wonder about the cost and profit of the Crypto Mining technology. As it’s legal in most countries, include the biggest Eurpoean countries and the USA, Bitcoin mining started to be a popular new way of making money.
Having a processor, motherboard and other equipment is a pretty good environment to start mining, and this also is a reason for new companies to emerge. The investments to be made will bring a lot of return to the people. Due to its high efficiency, it is one of the most preferred mining methods. Companies that provide cloud mining services generally prefer GPU equipment. Companies often have a lot of equipment and are able to increase their earnings more than normal people as having very large equipment entails huge costs.
Crypto Mining, Is It Still Profitable?
When we entered 2020, the depreciation of all financial products due to the coronavirus, especially in March, caused the miners to go through difficult paths. Due to the price drop in the crypto money market, the miner had to turn off the device due to the high cost, which was the bill of the hard time he had. When we have already examined it, we can say that after the sharp fall in March 2020, there was an upward movement in the price and the miner had the opportunity to make a move before the bitcoin reward halving. In the light of all these developments, we see that the central banks of many countries, especially the Fed, have projects that integrate digital currency and blockchain technology into their base, which can also mean that Crypto Mining can create a profit fort the ones who can lower thier producing costs.