Bitcoin Mining Made Simple

A lot of people would consider you archaic if you said you didn’t know Bitcoins. However, it’s totally forgivable if you can’t really figure out the mining part. There are tons of Bitcoin owners who do not even know or understand jack about Bitcoin mining.

This is why we have decided to cover the basics in this article as simply as we can.

So, first…

What is Bitcoin Mining?

In the real world, the Central Bank mints and distributes the money we use, right? Now, the process of Bitcoin mining is kind of similar to what the Central Bank does. Bitcoin mining is one of the main ways to earn Bitcoin at the current moment, as opposed to trading the cryptocurrency on Bitcoin exchange websites, that you can easily find on a site like Btxchange.

So, we have people called miners who verify Bitcoin transactions and use a special kind of software to complete some difficult math problems. Only when this problem is solved can the transaction be deemed verified and added to the blockchain.

It’s actually a sort of competition and anyone who comes out tops gets rewarded with Bitcoin tokens. This is how new Bitcoins are introduced to the market.

So, as you can see from our definition, Bitcoin mining helps us achieve two basic things:

It avoids double spending by verifying past transactions.

It introduces new coins to the market.

Who Can Mine Bitcoins?

In our normal everyday world, you cannot go ahead and mint money yourself except if you’re looking for trouble. However, the world of cryptocurrencies is somewhat different.

If you’ve got the necessary hardware and software, you can mine. You don’t need a permit. However, it is risky.

First, it will leave a considerable dent in your electricity consumption. You’d also need excellent cooling systems, as well as fantastic network connection. And yet with all of these, no one’s to say that you’d necessarily be rewarded. So, obviously it’s a big risk.

To manage this, however, some people choose to mine as a “pool” rather than individually, in order to reduce collateral damage. Of course, the rewards aren’t as high as when done individually, but then again, the chances of even getting rewarded at all are much higher as a pool.

Bitcoin Mining Basics

Transactions are made.

Miners verify and compete to complete a math problem.

Winner gets rewarded with Bitcoin tokens.

Verified transactions are added to the blockchain.

Josh Wardini, Community Manager, Webmastersjury