“Mom, where do bitcoins come from?” Well, you see, when a bright young Bitcoin catches the eye of an ambitious miner and because they love each other so much …
Wait, it’s obviously too hard to solve here. Also, my whole goal is to make things simple. Anyway, bitcoins are made by solving complex mathematical problems. It does a powerful machine built to solve these mathematical problems. This process is called mining. People who own these machines to make money extracting bitcoins are called miners. When a batch of problems is solved, it is known as a block. Blogs are verified by other users and, once verified, are added to what is called the blockchain. This chain continues to grow with a new block being added approximately every 10 minutes. This chain is really just a big book that will continue to grow and never end.
Very powerful machines that draw a lot of energy increase the monthly utility bill of the miner. The reason it needs so much power is the genius of the math involved. It requires the mining machine to perform complex cryptographic algorithms. Once the machine solves a math problem, a block of coins is born. Each time 210,000 blocks have been created, the reward for the miner is halved. It takes 4 years to achieve this. So it looks a bit like the Bitcoin Olympics. Currently, the block reward is 12 bitcoins (on June 23, 2020 the reward will only be 6 coins). These coins go to the miner, whose machine was the lucky winner of the lottery at the time. There is a winner every 10 minutes. There are also many miners competing around here. This miner now has something of value. Mine enough coins and pay the light bill and then some.
There is another way to mine as well. It’s called cloud mining. With this type of mining you pay to use someone else’s network and this will significantly reduce your profits. The positive of this method is that it does not require the use of electricity or even buy a machine.
It sounds good for me. I want to start mining now. Is it a good idea and can I generate passive income regularly? Possibly. Stay strong for now and you can call later.
Let’s try to break it down.
Going back to the original form of mining machinery, you should start by buying a quality mining machine. That would get you back about $ 2,000. Here is a picture of a good machine (Bitmain’s Antminer S9) capable of creating a high hash rate of 14 TH / s. 1 TH / s is 1,000,000,000,000 hash per second. This machine does it 14 times. This is very powerful. A hash is just a very long number that the machine creates each time trying to solve the algorithm. Again, to use my lottery analogy, all these machines are left out in hopes of being the next winner.
Then, your chances of winning are getting harder, with more competition. More complicated this issue is that every time a math problem is solved, the next problem becomes more and more difficult to solve. The difficulty of the Bitcoin network changes approximately every two weeks or 2,016 blocks. The number of bitcoins that will never be created is finite. This number is 21,000,000. Once we reach this number, there will never be any other Bitcoin extracted. However, the blockchain will continue to expand because it is used to verify every transaction or purchase.
Remember that pseudonym of Satoshi Nakamoto I wrote about? Did you know that current math problems are over 70,000 times harder to solve for machines than in the case where the first Bitcoin exploded in 2009 ?! It is estimated that the final coin will be extracted in 2140 because the system is halved every four years (210,000 blocks). 16,400,000 coins (78%) have already been extracted and each coin from there will be extracted at a much slower rate. Yes, you read that right. Basically, 80% was exploited in the first 8 years and it will take more than 100 years to exploit the final 20%. If any of my big, big, great-grandchildren are reading this, I hope you’re sitting with our family’s bitcoins, which are now valued at 220,000 for Bitcoin. We can all dream well!
Buying a mining machine or buying a cloud mining contract is risky. While there are some relevant success stories, be sure to research them thoroughly before deciding if mining is right for you. For all people who make money, there are many people who lose money.
By the way, a great place to see all the cryptocurrencies and their currencies and market capitalization, Coin Market Cap is an excellent resource. You can see the 700 most fly-by-night altcoins out there. An altcoin is just another way of saying any cryptocurrency other than Bitcoin. By now you probably know that Bitcoin is like the Rose Bowl, everyone’s grandfather. I would really try to limit my approach and research into the top ten for now. It’s not that there aren’t any success stories now of one of the almost useless ones. Is that finding one is like getting the right penny. Staying with established companies recognized by top analysts is a much safer move. The same goes for the exchange you use to buy, sell and trade. That’s why I use Coinbase to do my trades, as they are the most reliable, secure and convenient exchange. They also have the most thorough examination process when it comes to adding altcoins.
Here is a summary of the key points of this article:
-Bitcoins are created from mining
-Mining is done 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 get tougher as coins are mined and the speed of production decreases
-As of May 2017, there were only 72 bitcoins mined per hour (12 every 10 minutes)
-On June 23, 2020, it will be halved to just 6 created every 10 minutes
-About 80% of the finite number of Bitcoin, 21,000,000 coins, have already been extracted
-Competition between miners and increasingly complex mathematical problems make it more difficult to make a profit mining
-The final coin is estimated to be mined in 2140