Bitcoin Mining Explained for Beginners

February 18, 2020, by Maayan
Bitcoin mining is the powerhouse behind Bitcoin and the process by which new Bitcoin is created. Here’s everything you need to know about mining.

How Does Bitcoin Mining Work?

Unlike regular money, Bitcoin isn’t issued by a bank or backed by a government. Instead, it’s created by a community of users who dedicate themselves to the task of “mining.”

Bitcoin mining serves two purposes. First, it’s the process by which Bitcoin transactions are processed. Every Bitcoin transaction that takes place is included in a block, and thousands of miners compete to have the privilege of validating those blocks.

Mining is also the process by which new Bitcoin is created and added to Bitcoin’s supply. Miners who successfully validate blocks receive Bitcoin as a reward, which means that the amount of Bitcoin in circulation is continually growing.

Bitcoin mining is also highly competitive. Miners who dedicate the most computer power (or hash power) have the greatest chance of validating new blocks.

This process ensures that no single miner gains too much power or control over Bitcoin. The same miners cannot approve blocks over and over again―a feature that keeps Bitcoin mining secure, decentralized, and resistant to attack.

What Is Halving?

Bitcoin halvings are dates when mining rewards are cut in half.

Each halving makes Bitcoin mining less profitable, which discourages miners from participating and slows down the creation of new Bitcoin. This reduces Bitcoin’s inflation rate, which in turn ensures that Bitcoin stays in high demand.

Halvings also ensure that Bitcoin maintains a reasonably high price. However, future halvings may not have an immediately noticeable effect. Many experts argue that Bitcoin halvings are “priced in,” meaning that markets anticipate changes to Bitcoin’s supply and price Bitcoin accordingly in advance.

Nevertheless, Bitcoin halvings may have a beneficial effect on Bitcoin’s market value in the long term.

The next Bitcoin halving is scheduled for May 2020.

Can I Get Bitcoin By Mining?

It is still possible to mine Bitcoin if you own a specialized device called an ASIC miner.

However, ASICs are very expensive. They typically cost hundreds of dollars, and they quickly become obsolete. ASICs are also very expensive to run due to their high electricity consumption, meaning that your electricity bill may consume all of your profits if you attempt to mine Bitcoin.

Due to the high cost of ASIC miners, Bitcoin mining is mainly carried out by large companies. These firms operate large data centers and dominate Bitcoin’s overall mining hash power―making it difficult for individuals to mine Bitcoin in their home at a profit.

As a result, the simplest way to obtain Bitcoin in 2020 is to purchase it from an exchange like Jubiter.  Buying Bitcoin costs money, but doing so is cheaper and faster than mining in the long run.

Additional Resource:

Bitcoin mining profitability calculator

Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.