With the revolutionary beginning of blockchain technology, we also ask this question to ourselves: Where does the money in blockchain come from? All these bitcoins we give or take need to have a source so that we can continue to exchange more tokens or coins. In this blog, we will understand what blockchain mining is and see how each miner can contribute to the blockchain world.
The process of generating a block of transactions for the blockchain is called mining. It includes network nudes that verify and secure blockchains and gets awarded in return. The proof-of-work system that was first developed in Bitcoin is highly related to blockchain mining. Proof-of-work blockchains are secured by virtual miners around the world racing to find the tokens by solving complex mathematical equations. The person who becomes the first in this competition is rewarded with an appointed amount of coins (Coinbase).
Proof-of-work (PoW) is a blockchain consensus mechanism that develops network validation by rewarding miners for adding computational power and difficulty to the network (Blockworks). Several common crypto coins such as Bitcoin, Ethereum, Dogecoin, and LTC use proof-of-work to maintain a secure decentralized blockchain. More miners are encouraged to join the network as the value of a cryptocurrency grows, which increases its power and security.
One of the reasons that prior iterations of Bitcoin failed was due to the fact that it needed centralized institutions to prevent the double spending problem of digital tokens. After some improvements were made to the proof-of-work system by adding blockchain miners, anonymous people verified the validity of Bitcoin transactions. Even though there are a lot more to learn about proof-of-work and its future, this is the main connection it has with blockchain mining.
There are 21 million total bitcoins right now, and nearly 19.7 million of them are mined. So approximately 1.3 million bitcoins are left to be mined, but also there are 900 freshly cooked new bitcoins produced per day. As we can understand from this data, there will be an end to this blockchain mining process. Currently, it’s assumed that the last bitcoin will be mined at about 2140. If you want to explore more about these data and dates, check out this site: https://bitbo.io/how-many-bitcoin/#allbitcoinsmined
Previously, we discussed how minors compete with each other to solve math problems to gain a specific amount of coins. Also, as people rapidly start to improve their mining process, the number of bitcoins left to mine is decreasing day by day. In order to prevent sudden scarcity, the award that miners receive is reduced by 50% and also the number of new Bitcoins made gets halved once in four years. The last blockchain halving just happened in April 2024 when the reward for each blockchain mined was cut in half from 6.25 BTC to 3.125 BTC (Coinbase).
Bitcoin mining is generally done by using expensive hardware in large mining pools. Since the chance of receiving a reward by mining with a regular computer is very low, people generally use other strategies to increase the probability of winning. Computers designed specifically for mining cryptocurrencies are called mining rigs. The important point is that different cryptocurrencies can use different hashing algorithms, so the hash rate is not directly transferable between all coins.
The first tool that you would need is the graphics processing unit (GPU) with high quality for a computer. CPU (Control Processing Unit) is an important control center of a computer that has a role in mining. There are GPU and CPU Miners available, but they’re not as common as specific rigs for mining processes because they are not optimized to be as energy efficient as possible in one specific type of calculation (River). The power supply is also crucial since it ensures the stability of electricity to the mining rig (Cointelegraph).
The Application-Specific Integrated Circuit, or ASIC, is currently the most widely used mining equipment. ASIC, in contrast to the others, is made specifically for a single purpose rather than being general-purpose. A specific application of this is in mining which creates significant exceeding on other computers' power efficiency.
Lastly, there are mining pools available that are managed by third parties and coordinate groups of miners. The main purpose of mining pools is to increase the chance of receiving an award by working collaboratively and sharing the award they get according to their workload.
Resources:
Mining
https://www.coinbase.com/learn/crypto-basics/what-is-mining
Proof of Work
https://www.coinbase.com/tr/learn/crypto-basics/what-is-proof-of-work-or-proof-of-stake#
https://blockworks.co/news/what-is-proof-of-work
Bitcoin Halving
https://www.coinbase.com/bitcoin-halving
Mining Hardware
https://river.com/learn/mining-rig/
https://cointelegraph.com/news/cost-home-crypto-mining-bitcoin