Editorial Feature

What is Bitcoin Mining?

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Bitcoin was created and established in 2009. The digital currency was invented by an unknown creator who lives under the alias Satoshi Nakamoto. Transactions with Bitcoin are made by the computational solution of mathematical problems and so do not have a middle man - meaning, the service completely eliminates the need of central banks and runs on its own.

Bitcoin has gained exponential popularity since its creation in 2009 due to its advanced security, anonymity, and lack of governmental ownership. Five percent of Americans use bitcoin, and approximately 32 million bitcoin wallets have been set up.

Bitcoin Mining

Bitcoin mining is essentially the fundamental process of the Bitcoin system. The miners, or computers, provide Bitcoin users with substantial security and confirmation of financial transactions. The computers that secure the network and make sure the transactions go through smoothly have to solve a complex computational problem which produces Bitcoins well known, “blockchain.” If Bitcoin eliminated its miners, the network would be vulnerable to hacking and system malfunctions.

As miners secure the Bitcoin system, they are paid in rewards every ten minutes - the reward is in bitcoins. The mining system has three main goals: to secure the network, issue new Bitcoins, and confirm transactions.

Miners are able to keep the Bitcoin network safe by making it nearly impossible to hack or interfere; therefore, the more miners, the better, and the more security is provided. A Bitcoin transaction can only be backpedaled with over fifty percent of the network hashpower, so miners avoid this by distributing Bitcoins across  many miners.

Currencies tend to be distributed by central banks, and these banks can issue new money when necessary. Miners can not just create Bitcoin currency out of nothing; there must be a computing power to produce new coins.

Bitcoin transactions must be added in a block in order to be properly embedded into the blockchain. Due to this, miners include transactions sent on the Bitcoin network in their blocks - a transaction is only safe and finalized when it is part of a block.

How are Bitcoins Mined?

Although individuals can mine bitcoins, they are not advised to do so. The process lacks profit and is a skilled artistry to learn. Bitcoin mining usually takes place in massive warehouses with hundreds of computers.

Mining can be expensive and result in no profit However, there are a few things people can do if they are still interested in the mining system. A user would need mining hardware and a mining pool; this consists of specialized mining computers with an ASIC miner, as well as joining a mining pool where the user shares their hash rate with the pool. After this, the miner must get a Bitcoin mining software in order to connect to their mining pool and materialize their Bitcoin making.

In light of this hardware, all Bitcoin mining is operated on ASICs and takes place in warehouses or data-centers with cheap electricity.

Problems with Bitcoin Mining

There is a lot of necessary electricity in the process of Bitcoin mining. Bitcoin's current estimated annual electricity consumption is at 73.12 TWh. Its annual carbon footprint is 34,733 kt of CO2, and its carbon footprint per transaction is 286.87 kg of CO2. The estimated electricity used over the previous day is 200,332,771 KWh, and about 6,770,506, of US households, could be powered by Bitcoin’s energy, while the number of US households powered for one day by the electricity consumed by a single Bitcoin transaction is approximately 20.

Although these numbers are minuscule compared to other funding and financial industries that provide transactional services, they are still numbers to consider as the currency grows in popularity.

There are other issues concerning Bitcoin’s viability and capital controls that are raised by many academics and economics.

Sources

Disclaimer: The views expressed here are those of the author expressed in their private capacity and do not necessarily represent the views of AZoM.com Limited T/A AZoNetwork the owner and operator of this website. This disclaimer forms part of the Terms and conditions of use of this website.

Sydney Luntz

Written by

Sydney Luntz

Since graduating from the University of York with a BA Hons. in English Literature and Linguistics, Sydney has spent her time interning and freelancing before attending University of Arts College London in the fall, to complete a Master's in Data Journalism. In her spare time, you can catch Sydney reading a book, at a concert, or wandering a gallery!

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