The mining activity works as a transaction processing service provision for the network. The practice is not just to validate the network of cryptocurrency and keep it fraud-proof, but also to place new units of the asset on the market. That is, whoever provides this service receives a fee. The experts recommend to explore the latest Cryptocurrency news about latest crypto processes, methods and techniques. You can check out all-inclusive Crypto news at The Next Bitcoin.
How Bitcoin is produced
Mining involves providing computing services to the network of a particular cryptocurrency, such as Bitcoin. In a nutshell, mining is nothing more than solving a mathematical problem, checking if there are enough Bitcoins for the transaction and if the other party, the recipient, is able to receive that amount, for example.
As with precious currencies, Bitcoin has a limit to be “mined” of 21 million units. In the case of cryptocurrency mining is responsible for maintaining the functioning of the blockchain, the inviolable block network that holds all transactions made. The amount of cryptocurrencies to be issued is determined by its own protocol, designed so that a block is issued every 10 minutes.
The block reward is also defined by the protocol itself. However, every four years, it is reduced by 50%. This reduction is known as halving, and the phenomenon causes the creation of new Bitcoins to be halved, making it scarcer and thus impacting its value.
Following the rate of halving every four years, the production of new Bitcoins will end in 2140, when the 21 million units of cryptocurrencies will have been issued.
Solving math problems might seem simple at first. However, the complexity and quantity of the equations demand a high processing power, superior to common personal computers. Therefore, dedicated miners have specific equipment for this purpose, known as ASCI miners.
This processing power is directly related to the number of problems it manages to solve per second. This reason is known as the Hashrate (mining fee).
Those who have specialized mining equipment have the advantage of having a much larger processing capacity, as the higher the Hashrate, the more the miner can earn from transaction fees.
Even so, alone it would be very difficult to compete with the big miners, so the small ones gather in groups called mining pools. Together, they seek to solve the blockchain block, increasing its processing power and thus having a better chance of finding a solution to the problem and receiving your payment.