Bitcoin’s value has officially surpassed $15,000 in recent days, adding to its already impressive ascent this past year alone. Because of this, investors all over the world have begun to tap into this lucrative market, despite the continuous confusion that surrounds it. What exactly is bitcoin mining?
Mining is the process of actually creating bitcoins. Transaction records are added to the company’s public ledger (commonly referred to as the blockchain) by bitcoin miners, producing all of the online currency that investors have access to.
Expanding on the idea of blockchain technology, this is utilized through miners using a specific type of software that, in layman’s terms, “does the math” to confirm transactions and create even newer bitcoins. This is done at a consistent rate, with new transactions being added every 10 minutes. The “hash rate” is another important term to understand, as this is the exact number of mathematical calculations the software can make per second. A higher hash rate translates to a higher chance of finding a profitable bitcoin investment.
This may sound like a simple process done by computers and requiring little to no proactiveness from the investor, but results are not guaranteed, and mistakes do happen. These are often a result of the design itself. The rate at which each piece of blockchain technology should be mined is, as mentioned before, roughly 10 minutes or so. Should this take longer than normal, its attempt to maintain a consistent rate can become jumbled.
Bitcoin’s computer network also uses an incredible amount of energy and electricity through mining, so much so that it has been addressed as serious issue that needs to be dealt with. It is estimated that bitcoin’s electricity consumed this past year made up .14% of the entire world’s electricity consumption; something many argue is very inefficient. While this may seem concerning, the constant upgrades that will inevitably be introduced throughout bitcoin’s tenure are sure to address this, and find a solution.
Like all businesses, it should come as no surprise that bitcoin mining comes with risks. That alone should not deter you from joining the industry if you are interested in doing so. This can be an extremely profitable business. Bitcoin miners are often rewarded with coins themselves, and are thus able to receive a large chunk of money depending on the cryptocurrency’s value. While it is still a new field, it is one that offers potentially huge leaps forward in the world of technology, and finance.