How Does Bitcoin Mining Work?

In this article, we’ll be talking about what Bitcoin mining is, how it works, its requirements, and how much a miner earns.

What is Bitcoin Mining and How Does it Work?

This is the process by which new bitcoins are entered into circulation. It is also the way the network confirms new transactions and is a critical component of the blockchain ledger’s maintenance and development.

I know when you hear the word “mining”, you might think of physical labour in an underground cave. But no, in this case, I guess you could call it “digital mining”.

It is done by solving complex cryptographic hash puzzles to verify blocks of transactions that are updated on the decentralized blockchain ledger. Solving these puzzles requires powerful computing power and sophisticated equipment.

The first computer to find the solution to the problem receives the next block of bitcoins and the process begins again

Bitcoin Mining Requirements

To successfully mine Bitcoin, certain tools are required. They are:

Hardware GPU (graphics processing unit), SSD for crypto mining, or ASIC (application-specific integrated circuit)
Mining software
A Bitcoin wallet
Preferred mining pool (if one chooses pool mining option instead of solo mining)

How Much Does a Bitcoin Miner Earn?

The rewards for Bitcoin mining are reduced by half roughly every four years.1 When bitcoin was first mined in 2009, mining one block would earn you 50 BTC. In 2012, this was halved to 25 BTC. By 2016, this was halved again to 12.5 BTC. On May 11, 2020, the reward halved again to 6.25 BTC.

As of March 2022, the price of Bitcoin was around $39,000 per bitcoin, which means you’d have earned $243,750 (6.25 x 39,000) for completing a block.

To keep track of precisely when these halvings will occur, you can consult the Bitcoin Clock, which updates this information in real-time. Interestingly, the market price of Bitcoin has, throughout its history, tended to correspond closely to the reduction of new coins entered into circulation. This lowering inflation rate increased scarcity and, historically, the price has risen with it.

Conclusion

Bitcoin mining is not something just anybody can do. It is complex and you need to be tech-savvy and have a vast knowledge and understanding of how it works.

Although it is a tedious process, the reward is quite worth it.

Endeavor to do further research if this is something you want to delve into.