Computers involved in bitcoin mining try to solve complex mathematical problems that are near impossible for a human being to solve. Not only are these problems becoming increasingly difficult, but they are also timeconsuming for computers as these take a lot of time, and electric power, to solve.
In fact, expert miners estimate that approximately $150,000 worth of electricity is used each day by Bitcoin miners all over the world!
On average, it takes about 10 minutes for Bitcoin miners to find a new block with each block containing about 2,000 transactions. These 10 minutes is the time needed for bitcoin transactions to be validated by the network and to form a new block.
Hence, a new block is created every time these complex problems get solved. This process is more commonly known as ‘Proof Of Work,’ and this eliminates the possibility of having only a few miners mine all the remaining bitcoins for themselves.
Since Bitcoin’s network is decentralized without a central body verifying the transactions, this self-governed system means each miner is an integral part of the system. Without miners, there would be no bitcoins, plain and simple. Due to the important role miners’ play in the Bitcoin network, they are rewarded in a few ways.
First, the transaction fees that users pay for each bitcoin transaction is sent to the miners. Secondly, the network rewards each winning miner a set number of bitcoins; the second reward is important because this is the only way that new bitcoins are created. Thus, miners have to continue mining so that more bitcoins are created and released into the network.
In 2009, when the first Bitcoin block was mined by Satoshi Nakamoto himself, the reward was 50 bitcoins for each block. However, the reward is reduced by half every 210,000 blocks or approximately 4 years.
This means that 210,000 blocks after the genesis (or first ever) block was mined, the miner who successfully mined the 210,001st block was only rewarded 25 bitcoins; this occurred on 28th November 2012.
Then another 210,000 blocks later, on 9th July 2016, the reward was again halved, this time into 12.5 bitcoins. It is expected that sometime in the year 2021, the next 210,000 blocks will be completed and the reward will drop down to 6.25 bitcoins.
Another interesting thing to note is that while the rewards are getting smaller and smaller, the mining difficulty is increasing. There’s far more competition now, and solo miners find it near to impossible to find a single block by themselves. Joining mining groups allow several miners to pool their resources, but this also means they are sharing the bitcoin reward among themselves.
Bitcoin Cloud Mining – An Alternative To Joining Mining Pools?
Beware! Bitcoin cloud mining platforms are full of Ponzi-style scamming operations. While some see this as a great alternative to mining pools, there are only a few legitimate cloud mining operations.
In theory, cloud mining is the perfect solution to people who want to mine bitcoins without buying their own mining computers and joining a pool.
They don’t need to worry about electricity and all the other problems that real miners have to deal with. In short, all you have to do is pay up the subscription fee and wait for your bitcoin earnings to be sent to your wallet. Sounds great, right?
Many people are attracted to this model, and of course, scammers and thieves are ready to lend them a hand and relieve them of their money.
This million dollar question will get you many different answers. Some would encourage you to go ahead and mine, while others will tell you the time to mine bitcoins has passed. With Bitcoin prices continuously breaking records and reaching all-time highs, the investment may be worth it.
But Bitcoin is such a volatile cryptocurrency, and we can never predict the direction its price is going to take, so it’s a huge risk for miners as well when the price drops.
When this happens, the best thing for miners to do is to hold on to their bitcoins and wait for the price to go back up again before selling their bitcoins to eager buyers.