What is Bitcoin mining? [Everything you need to know]

Bitcoin Mining and Gold Mining

For a high-level insight, we will compare bitcoin mining with classic gold mining. In the case of gold mining, people equipped with gold-digging and filtering equipment, dig day and night to find grains of gold which are then filtered to extract the precious and pure gold.

Who Are Bitcoin Miners?

Bitcoin Miners are the nodes present in the bitcoin network who own enormous computational power. Before the transactions are picked by miners, they rest in a temporary place called mempool.

How Bitcoin Mining Works?

Now that you know about bitcoin miners let’s talk about the mathematical puzzle they try to solve. The mathematical puzzle is to guess a 64-bit hexadecimal number (called a hash), which is lower than a target hash.

Bitcoin Mining Difficulty

Now, a specialized device called ASIC (Application-Specific Integrated Circuit) is popularly used to mine bitcoin. They are small USB shaped device which has an integrated circuit to solve the mathematical puzzle.

  • Nodes transact over the Bitcoin Network.
  • The transactions are stored in the mempool.
  • Miners pick up transactions that have higher transaction fees.
  • Based on that, a hash is calculated, which is lower than the targeted hash.
  • The miner, who solves the puzzle fastest gets to form the block in the blockchain.

Importance Of Miners

  • Maintains the integrity of the blockchain network and provide security.
  • Responsible for minting new bitcoins. Hence, the circulation of bitcoin won’t stop. But with the decrease in mining reward, it is esteemed that by 2040, the minting of new bitcoin would stop.
  • Keeps the network active and running 24*7.

Cost Of Bitcoin Mining

  • A massive amount of electricity. The computational devices require a lot and a continuous supply of power to operate. As a result, sometimes, the cost of electricity may exceed the mining reward.
  • Heating of equipment. The mining equipment releases a lot of heat. So, they need proper cooling and temperature regulation to operate.

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Gaurav Agrawal

Gaurav Agrawal

Telegram @gaurav_zen , Editor — Coinmonks publication (medium.com/coinmonks) and working on (https://coincodecap.com)