Mining - definition
Mining is the process of releasing new cryptocurrency
What is the meaning of mining?
The word ‘mining’ conjures up images of grime-encrusted men wielding pickaxes, or large contraptions drilling underground to uncover precious metals.
Mining for cryptocurrency doesn’t involve physical digging, though. Instead it uses computers to solve complex maths problems to ‘discover’ unreleased bitcoin.
There are 21 million available bitcoin but only around 18.7 million in circulation. This means 2,300,000 have yet to be released. These ‘undiscovered’ bitcoin can only be released into circulation through mining.
Bitcoin mining is carried out by bitcoin miners – companies or groups of people who have pooled their resources to work on cryptocurrency.
Miners don’t create bitcoin – they are given bitcoin as a reward for making sure the existing bitcoin is verified. The bitcoin given to the miners then goes into circulation, creating ‘new’ bitcoin.
BTC/USD price history
|Oct 25, 2021||61850.05||1003.10||1.65%||60846.95||62228.30||60644.85|
|Oct 24, 2021||60853.35||-444.10||-0.72%||61297.45||61496.80||59489.75|
|Oct 23, 2021||61297.05||613.20||1.01%||60683.85||61753.75||59638.50|
|Oct 22, 2021||60683.20||-1495.65||-2.41%||62178.85||63762.50||59956.45|
|Oct 21, 2021||62200.00||-3804.90||-5.76%||66004.90||66668.75||61959.90|
|Oct 20, 2021||66004.65||1717.60||2.67%||64287.05||67020.00||63519.90|
|Oct 19, 2021||64286.75||2255.05||3.64%||62031.70||64524.25||61351.95|
|Oct 18, 2021||62033.45||505.75||0.82%||61527.70||62707.40||59878.75|
|Oct 17, 2021||61512.70||631.35||1.04%||60881.35||61717.20||59619.45|
|Oct 16, 2021||60876.75||-813.70||-1.32%||61690.45||62390.70||60150.70|
|Oct 15, 2021||61695.45||4340.85||7.57%||57354.60||62908.70||56857.75|
|Oct 14, 2021||57353.25||-19.75||-0.03%||57373.00||58553.95||56799.50|
|Oct 13, 2021||57372.50||1378.95||2.46%||55993.55||57811.50||54220.00|
|Oct 12, 2021||55997.35||-1498.75||-2.61%||57496.10||57711.40||53648.30|
|Oct 11, 2021||57494.40||2813.25||5.14%||54681.15||57841.15||54437.25|
|Oct 10, 2021||54678.25||-278.95||-0.51%||54957.20||56075.95||54104.95|
|Oct 9, 2021||54960.35||991.15||1.84%||53969.20||55495.70||53679.20|
|Oct 8, 2021||53968.10||161.75||0.30%||53806.35||56172.25||53621.00|
|Oct 7, 2021||53806.50||-1547.05||-2.79%||55353.55||55379.15||53395.50|
|Oct 6, 2021||55351.90||3852.65||7.48%||51499.25||55789.25||50411.75|
How is bitcoin created?
When someone sends bitcoin anywhere, it's called a transaction.
Bitcoin miners solve mathematical problems in order to clump transactions together in blocks. They then add the block to a public record of bitcoin. This is called the blockchain.
When bitcoin miners add a new block of transactions to the blockchain, they make sure those transactions are accurate. In particular, bitcoin miners make sure that bitcoin is not being duplicated – so-called ‘double-spending.’
To add these transactions as blocks, miners need to solve complex maths problems. They do this by running programs on high-powered computers.
Bitcoin mining facts
The amount of CO2 generated by computers on the bitcoin network each month is equal to 1 million transatlantic flights.
The rewards for bitcoin mining are reduced by half every four years by a process called halving or ‘the halving’.
When bitcoin was first mined in 2009, mining one block would earn you 50 bitcoin. By May 2020, the reward had dropped to 6.5 bitcoin.
In November 2020, the price of bitcoin was about $17,900 per bitcoin, which means you'd still earn $111,875 (6.25 x 17,900) for completing a block.
Is bitcoin mining safe?
There is a risk that a spender can make a copy of their bitcoin and then send it to someone else. Mining involves a lot of work making sure this doesn’t happen, as there can be up to 300,000 purchases and sales occurring in a single day. This is why miners are rewarded with bitcoin.
What does mining mean?
Mining for cryptocurrency requires the use of extremely high-powered computers. Most miners use large banks of computers in warehouse-type operations.
While miners can be rewarded for verifying just one megabyte (MB) of transactions, they are often needed to verify thousands.
Mining explained: proof of work
To add a block of transactions to the blockchain, miners need to solve complex computational maths problems – these are also known as a ‘proof of work’. As the name suggests, it is evidence that the miner is doing their job.
Mining definition: what does a bitcoin miner do?
Miners aim to come up with a 64-digit hexadecimal number, called a hash, that is less than or equal to the target hash.
Basically, a miner's computer will be spitting out hashes at different rates – megahashes, gigahashes or terahashes per second. They will be guessing all possible 64-digit numbers until they arrive at a solution.
That is, the chance of a computer producing a hash below the target is extremely small so the mining computer will need to be fast.
This means the computer needs large amounts of electricity. In 2019, the energy used to power computers working on bitcoin mining was equivalent to the entire energy demand of Switzerland.
This is also why miners pool resources and use computers that use customisable application-specific iIntegrated circuits (ASIC). Often miners will work in countries such as Iceland, where electricity is cheaper and where the weather is colder – as computers are less likely to overheat.