What is bitcoin mining and the role of miners?

Modified on Sat, 18 Feb 2023 at 05:34 PM

Cryptocurrency such as bitcoin does not magically appear in your wallets. Unlike the traditional fiat currency where “dollars” and ”euros” are printed, bitcoin came into existence through bitcoin mining. 

 

Bitcoin Mining

Bitcoin mining is the process by which bitcoin transactions are verified and added to the blockchain. Also through this process, new bitcoins are released. The verification of bitcoin transactions requires advanced technology and powerful computer processing. Miners use their computers and specific hardware to complete these tasks. You can be a miner as long as you have access to the internet and suitable hardware.

 

Roles of Miners

Miners are getting paid for their work as tellers in the banks. They inspect the bitcoin transfers and the identity of the senders. They look for proof if the sender has enough funds to complete the transaction or not. In other words, miners are doing the work of verifying all bitcoin transactions. The verification process prevents double-spending and other common problems in fiat transactions. Miners check two things: (1) they ensure that your signature proves that you are the recipient of such bitcoin transfer, and (2) they verify that you have the bitcoin(s) that you wish to spend. Once everything is verified, miners add the transaction to a list of transactions that occurred called blocks. Thereby confirming each of the users' transactions in the blockchain.

 

Why do miners mine?

A bitcoin miner mines because of the 'block reward'. A block reward represents the amount of “new bitcoin released” or “discovered” with each mined block. The block reward started at 50 BTC in 2009 to 12.5 BTC in 2018. The block reward will continue to decrease as the system of giving block reward is halved every 210,000 blocks or roughly every 4 years. Also, if you think about it, the decrease of block rewards makes sense because as more bitcoins are released to the bitcoin circulation, the closer we are to the bitcoin cap of 21 million.

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