Bitcoin and Bitcoin Mining Explained

Posted on: November 26, 2018

What is Bitcoin?

Is Bitcoin a currency? An investment? An asset? A stock? Well, yeah. It can be all of them. One individual Bitcoin is a piece of digital currency, otherwise known as BTC. As a general concept, Bitcoin is a system for securely buying, storing, and using money digitally. Bitcoins are found by Bitcoin miners and added onto the public blockchain network.

Thanks to rapid advances in public interest in the cryptocurrency, you can buy Bitcoins online or on your phone with popular apps and platforms – though many still choose to mine Bitcoins. Once you have Bitcoins stored in a Bitcoin wallet, you’re welcome to use them as currency or you can hold onto them as an asset to invest in (much like gold). The thing about Bitcoin, which is mined with expensive hardware designed to solve intricate mathematical problems, is that there is a finite amount of it – 21 million Bitcoins, to be exact.

What is Bitcoin Mining?

The process of Bitcoin mining is an elaborate one, and a deeply controversial one as well. This is the process where solving the previously-mentioned mathematical problems comes into play. In Bitcoin mining, the computer solving this problem is part of what’s known as the “proof-of-work system.” In this system, the computer attempts to determine a number. The computer that successfully finds the number uses it to hash a block to the previous block in the blockchain network, announces it to the network which validates it and is then rewarded with a Bitcoin.

This process has become controversial because the amount of energy it takes to mine a single block is astonishing; computers make billions of guesses per block, and the system is designed to keep the pace of a block getting mined every 10 minutes. That’s billions upon billions of guesses a day for just a single computer, and the constantly-growing group of miners means a lot of people using this method that is not at all energy-efficient.

It also has made it far less likely for a single person to mine Bitcoin. Miners are a dime a dozen today, and an individual will need to spend a lot of money on their computer and an expensive ASIC miner that gives them the best chance of mining Bitcoin. As a result, mining pools, where Bitcoin miners pool their resources together and split the BTC reward among the entire pool, have become much more common.