mining bitcoin
What is mining bitcoin?
Mining bitcoin is one of the things that makes bitcoin great! In the world we know of today if you want to send money to somebody you would have to get a hold of your bank and request the money to be sent. This is normally done through getting a hold of their bank account information and sending the money through an online transfer. Depending on the way you send it this could have a high fee associated with the transaction and it could take many days to complete. This makes no sense, people should be able to send their money instantly and with little to no fees. This is where miners come into play.
Instead of relying on banks to transfer your money you instead, rely on what are called Miners. Miners are essentially people like you and me that get on the bitcoin network and help process transactions. (aka: Download a piece of software and let it run in on your computer) A transaction or group of transactions are essentially a giant math problem that takes computing power to try and figure out. So these miners get to compete with one other and whoever can solve this math problem the fastest wins bitcoin as a reward. Satoshi Nakamoto created a reward program build into Bitcoin to incentivize people to mine it. There will be a total of 21,000,000 coin in total created. (it's actually a tiny bit under that but close enough). Bitcoins only exists from people mining new ones on the network as a reward for processing transactions on the bitcoin network. The First 4 years miners shared 10,500,000 new bitcoins, next 4 years 5,250,000 coins, next 4 years: 2,625,000 coins, next 4 years: 1,312,500 coins etc... Currently there are over 17 million Bitcoins in circulation and a little under 4 million Bitcoins left to mine (We reached 17,000,000 Bitcoin back on April 26th 2018). We should reach 21,000,000 Bitcoin around the year 2140 So, the name of the game for people wanting to get bitcoin without paying money for it can just help the bitcoin network borrow your computer or whatever you use to help solve these math problems. Now, the faster you can solve the math problem the more likely you are to solve it faster than anybody else. Now the math problems are so complex it could take hundreds or even thousands of years to mine 1 bitcoins on a basic machine these days. When Bitcoin was first created the problems were much simple to solve, now they are much more difficult.
When Bitcoin was first created people were able to use the processors on their computers to mine bitcoin. After a while, the difficulty increased and people realized that they could use their graphics cards processors more effectively than their computers so you started to see people buy multiple graphic cards just to run bitcoin transactions. After a while, you saw people reprogramming microchips to do nothing process bitcoin transactions. After that, you saw companies pop up selling ASIC hardware (Applications-Specific Integrated Circuit Chips) That were manufactured specifically to do bitcoin transactions. As these ways of mining bitcoin became faster the difficulty of solving these math problems increased which meant more computing power and drastically more electricity costs to run all these machines to mine bitcoin. People soon realized that if they got together and combined their efforts they could solve problems even faster so you started seeing these "pools" pop up. The bigger and more computing power a pool had the more often you solved these math problems aka process bitcoin transactions which meant the more often you got a reward. Once in a pool, you just split the reward with everybody in the pool.
There are many different ways to mine bitcoin and other cryptocurrencies which we will go over in the Advanced course. Here’s the most important part of bitcoin mining; You can mine it yourself as long as you have a computer running the bitcoin protocol software from anywhere in the world. Your participation is not limited to the transfer and receiving of bitcoin, you can create it as well.
Now once you have solved these math problems and verified the transaction and the payment was complete how do we keep track of all that and where is that information stored? That is where blockchain comes in! We will discuss that in the next course.
Some links to tide your curiosity over until the next lesson.