What does it mean to mine Bitcoin?

Outside of picking which currency you want to mine, there are a lot of decisions you need to make and things you should know about the only way to earn *new* crypto. From how mining really works to the why behind it and what’s going to happen when we reach the limits of coin mining, let’s go down the mineshaft.

Starting with the basics … When mining Bitcoin (and most cryptocurrencies), machines compete against each other to find the next block in the blockchain. They need to outdo the odds on who can most quickly guess a random 16-digit number. That number is run through a complex code generator or “hash.” If the output of the hash matches the code set in the blockchain, you win the block, and coins as a reward.

What the miners know before they start attempting to find the code:

• The solution will have 64 digits in total and will come from a 16-digit input.

• There is a finite amount of blocks available (Bitcoin is capped at 21 million).

• All target hashes begin with zeros — having at least eight zeros and up to 63 zeros.

• The chances of getting it “right” is one in 17.59 trillion.

Show me … Mining is like if you were to use a board of 64 squares (like the below) where each square can be one of 16 colors, to create a code-generator. Your task is to exactly match your board to one specific board. You’ll need to try as many different combinations of colors in squares as you can before someone else gets the right answer.

Miners work to beat the odds by using their computer power, or the combined computing power of multiple machines working together, to methodically work through their options as fast as they’re capable.

They call each attempt a “nonce” or a number only used once. It’s tried in the code-generator and is crossed off the list if it doesn’t match the target hash. This .gif to the left is showing roughly one attempt every 0.7 seconds, miners make an attempt at the correct code one quintillion times every second.

The people who mine Bitcoin are everywhere… Really anyone can become a miner as long as they have the financial ability to generate some computer power. But mainly, it comes down to three types of miners.

1. Individual miners. These are typically hobbyists and enthusiasts who have something set up in their garage or a closet. They’re likely slowly generating coins and are passionate about crypto.

2. Mining pools. This is the solution for most people who want to make a small profit. Your miners work with a group of other miners to generate more power toward finding a solution — profits are split based on your power contributions.

3. Mining farms. These are the big leagues. Warehouses full of miners work around the clock to generate attempts. They’re optimized for temperature and computing power, and they use a lot of electricity.

As for the future … Miners are gonna mine. While it’s most likely miners will keep validating transactions for the transactional fees, there are a finite number of Bitcoin blocks. And at some point (estimated to be in the year 2140), mining will no longer be a way for miners to earn new coins, thus losing the supposed financial benefit of mining and disincentivizing the other inherent task of mining, validating the blockchain. While that may lead to innovations in electricity and technologies, it may also permanently alter the market.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.' This assumes you are not selling investments or investment management services.