What is Bitcoin mining?
Bitcoin mining is the process used to validate transactions on the network and introduce new Bitcoin into circulation.
As of July 2024, around 19.5 million Bitcoin were in circulation. However, the cryptocurrency is programmed to have a total supply of 21 million coins, with the remaining 1.5 million Bitcoin yet to enter into circulation. Users known as “miners” use powerful computers to solve complex mathematical problems and “mine” new Bitcoin in a process called Bitcoin mining.
When someone transacts on the Bitcoin network, their transaction is placed in a block. Once the block is full, it must be validated before being added to the blockchain. The process is similar to filling up a cart at a store and having a cashier check and validate your items at the checkout. You can fill up your cart freely, but once it is full, the store needs to check every item to ensure you’re not stealing.
Bitcoin mining is like a digital treasure hunt. Equipped with powerful computers, miners search for a 64-digit hexadecimal code known as a hash, which represents a block of transactions. Miners find this code through a process called hashing.
Hashing requires computer hardware to search through trillions of hashes (strings of numbers and letters) to find one that matches a block’s difficulty (called the target hash). Once miners find a block’s target hash, they can verify and confirm the block’s transactions. This process releases more Bitcoin into the network. It’s similar to playing a game where the rewards are locked away, creating a sense of value. Only those with the skill and know-how to unlock them can earn rewards.
Finding the target hash can take a long time. The amount of time varies based on many factors, such as the current Bitcoin mining difficulty. A difficulty adjustment or change occurs every 2,016 blocks and raises or lowers based on the number of miners contributing to the network.
More miners mean a higher difficulty, while fewer miners mean a lower difficulty. It’s like searching for a treasure: it gets harder…
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