"Mom, where do Bitcoins come from?" Well, do you see, when a bright young Bitcoin attracts the eyes of an ambitious miner, and because they love each other very much …
Wait, it's obviously too difficult to solve here. In addition, my goal is to keep things simple. Whatever the case may be, Bitcoins are made by solving complex mathematical problems. This is done by a powerful machine that is built to solve these math problems. This process is called mining. People who own these machines to earn money by exploiting Bitcoins are called minors. When a lot of problems is resolved, it becomes a block. The blocks are checked by other users and, once checked, they are added to what is called the blockchain. This chain continues to grow with the addition of a new block every 10 minutes or so. This channel is really just a big book that will continue to grow and never end.
The very powerful machines that are used there consume a lot of energy and increase the miners' monthly utility bill. The reason why so much power is needed is the genius of the mathematics involved. The extraction machine must execute complex cryptographic algorithms. Once a mathematical problem is solved by the machine, a block of coins is created. Each time 210,000 blocks are created, the miners reward is halved. It takes 4 years to accomplish this. So it's a bit like the Olympics Bitcoin. Currently, the block reward is 12 Bitcoins (June 23, 2020, the reward will be only 6 coins). These coins go to the miner whose machine was the lucky winner at the lottery at that time. There is a winner every 10 minutes. There are also a lot of miners competing. This miner now has something precious. Remove enough coins and pay your electricity bill, then a few.
There is also another way to exploit. This is called cloud extraction. With this type of mining, you pay to use the network of someone else, which greatly reduces your profits. The good thing about this method is that it does not need to use your electricity or even buy a machine.
That seems alright to me. I want to start mining now. Is it a good idea and can I generate passive income on a regular basis? Perhaps. Hold on right now and you can make that call later.
Let's try to solve this problem.
To go back to the original mining method, you must start by buying a quality mining machine. It would cost you about $ 2,000. Here is a picture of a good machine (Antminer S9 Bitmain) capable of creating a high hash rate of 14 TH / s. 1 TH / s corresponds to 1,000,000,000,000 hashes per second. This machine does 14 times that. This is a lot of hash power. A hash is just a very long number that the machine creates each time while trying to solve the algorithm. Again, to use my analogy to the lottery, all these machines are disappearing in the hope of being the next winner.
Then your chances of winning are getting tougher with increased competition. What complicates things further, is that whenever a mathematical problem is solved, the following problem becomes progressively more difficult to solve. The difficulty of Bitcoin network changes about every two weeks or every 2016 blocks. The number of Bitcoins to create will be limited. This number happens to be 21,000,000. Once we reach this number, there will never be another Bitcoin extracted. However, the blockchain itself will continue to grow as it is used to verify every transaction or purchase.
Do you remember Satoshi Nakamoto, pseudonym of whom I spoke? Did you know that current math problems are over 70,000 times harder for machines to solve than during the first Bitcoin extraction in 2009 ?! The estimate is that the last piece will be extracted in 2140 because the system splits in two every four years (210 000 blocks). 16,400,000 pieces have already been extracted (78%) and each piece from now on will be extracted at a much slower rate. Yes, you read it well. By and large, 80% have been exploited in the first 8 years and it will take more than 100 years to exploit the remaining 20%. If one of my great-great-great-grandchildren reads this to me, I hope you sit well with the Bitcoins of our family, now worth 220,000 per Bitcoin. We can all dream right!
The purchase of a machine for a mining operation or a mining cloud contract is risky. Although there are some great successes, be sure to study them thoroughly before deciding if mining is right for you. For every person who earns money, there are many who lose money.
By the way, a good place to see all the crypto-currencies and their total in coins and market capitalization, Coin Market Cap is a great resource. You can see all 700 altcoins plus fly-by-night there. An altcoin is simply another way to tell any crypto coin that is not Bitcoin. Now, you probably know that Bitcoin is like the Rose Bowl, the grandfather of all! I would really like to try to limit my attention and do research on the top 10 for the moment. This does not mean that there will be no more success stories now. To find one, it's like choosing the right penny stock. Staying with established companies that are recognized by mainstream analysts is a much safer game. The same goes for the exchange you use to buy, sell and trade. That's why I use Coinbase to perform my transactions because they are the most reliable, secure and convenient exchange. They also have the most comprehensive verification process for adding altcoins.
Here is a summary of the key points of this article:
-Bitcoins are created from mining
-Mining is done by powerful machines that solve complex mathematical problems. You can also buy contracts called cloud mining if you do not want to buy a machine.
-The problems become more difficult as the parts are extracted and the rate of production slows down
-As of May 2017, there are only 72 Bitcoins extracted per hour (12 every 10 minutes)
-On June 23, 2020, it will be cut in half to only 6 every 10 minutes.
– About 80% of the 21,000,000 finished pieces of Bitcoin have already been extracted
Competition between minors and increasingly complex mathematics issues make it more difficult to transform profitably
-The last piece should be extracted in 2140