Bitcoin 101: Explaining Mining

Thousands of cryptocurrencies have emerged in recent years, but Bitcoin arguably remains the most popular option. It has often been compared to gold as a commodity because of the similarities when it comes to features. Firstly, they both store value and have a monetary element to them. They are also in a limited supply and are obtained through mining, although, obviously, the mining process differs between each commodity. For anyone who is thinking about investing and trading Bitcoin, it is paramount that they understand this process, so let’s dive in.

What Is Bitcoin Mining?

Bitcoin mining is a digital process whereby miners who secure the network process transactions using equipment and software designed to run mining procedures. The miners have to crack mathematical equations in order to be rewarded with Bitcoins. This is because they are hidden inside data blocks. They can only be found using an algorithm created by the creator of Bitcoin.

How Many Bitcoins in the World Are There?

Bitcoin is also similar to gold in that there is not an infinite supply; there is a limited amount. There are only twenty-one million Bitcoins in the world that can be mined and used. There is no real answer as to why. Some have speculated that it is because the unit prices of Bitcoin were eventually meant to align with that of traditional fiat currencies. Others believe it is to safeguard Bitcoin against inflation. The aforementioned supply limit has had a profound effect on the fluctuating rate of Bitcoin. Currently, just under nineteen million Bitcoins have been mined, meaning that there are just over two million left.

What Happens When They Have All Been Mined?

To state the obvious, once all of the coins have been mined, there won’t be any left for mining. If Bitcoin changes its protocol, it may be able to add more allowance, but there have been no such plans announced. This means that it is likely that the cap will remain in place. This cap could have a number of implications for investors and miners of Bitcoin.

Mining Bitcoin provides the miners with a portion of the Bitcoin for every block that they confirm, and they also earn money from transaction fees that are given to them as a reward for their efforts. When all of the Bitcoins are mined, the miners will not receive these rewards because there are no new coins to be found. Bitcoin halving has also affected miners in recent years because more and more Bitcoins have been found. As a result, miners only receive 6.25 Bitcoin rewards per block, whereas when Bitcoin first emerged, they received 50 Bitcoins.

The price of Bitcoin also impacts the miners’ rewards. The transactions fees are in a constant state of flux because they fluctuate depending on the price of Bitcoins themselves. In the last six months, the transaction price has remained steadily between $1.5 and $5. In the event of a crypto boom, it is likely that this fee will skyrocket. While this might seem like good news, there is no guarantee that this boom will happen.

There is also the potential for the mining process to become more refined to be made easier and cheaper. This process then offers miners more opportunities in terms of turning this into a business. However, Bitcoin mining is often thought to be bad for the environment because it requires a high level of energy consumption, making it more expensive for miners to operate.

As mentioned above, there are only around two million Bitcoins left to be mined. Once they have all been mined, the supply will become scarce, which could drive up the price. This could be great for investors as cryptocurrencies are notoriously volatile, with extremes on both ends of the spectrum. This is why entering the market now makes the most sense for aspiring investors before all of the Bitcoins have been mined. They could either hold the Bitcoins and wait for the maximum price or take advantage of smaller fluctuations to convert Bitcoin to cash. Paxful has many excellent resources that can help you become a successful cryptocurrency investor.

When Will All Of The Bitcoins Run Out?

In truth, it is hard to predict when Bitcoin will reach its limit. If the mining rate remains consistent, then the last Bitcoin will be mined by the year 2140. However, if Bitcoin continues to be used as a currency and serves the same functions as fiat money, it is likely to become more stable.

In Conclusion

Bitcoin remains one of the most popular cryptocurrencies, and for a good reason; it is far more accessible to novice investors and traders. However, when it comes to mining Bitcoin, you do need to do your research; the process itself is not necessarily difficult if you have the right software and infrastructure in place. In addition, while it might seem like the Bitcoins are running out, the truth is that it won’t happen any time soon.

Written by Eric

37-year-old who enjoys ferret racing, binge-watching boxed sets and praying. He is exciting and entertaining, but can also be very boring and a bit grumpy.