History Of Bitcoin Mining/ How it Started

History Of Bitcoin Mining/ How it Started

In simple terms, Bitcoin mining is a method of calculating the value of cryptocurrency assets through a cryptographic process. These processes mine Bitcoins in blocks, which are simply ledger files that permanently record all recent cryptocurrency transactions.

You should know that the size of the block decreases as the number of coins increase. Any block starts with 50 BTC (Bitcoin currency symbol), and as the number of blocks reaches 210,000, it halves. This results in a recurrent halving of the rewards for an individual block. This process is performed so that the inflation rate is regulated. Otherwise, there would be an uncontrollable number of paper currencies printing every second.

This concept in itself is proof that mining is not a simple process. It needs investments in the form of power, time, and computations. Also, with an increase in the time of mining these coins, its comprehensive power also increases.

Another fact to note is that the speed of emerging Bitcoins is inversely proportional and drops exponentially. Satoshi calculated the number to be approximately 21,000,000, which can never be exceeded. Let us explain this mathematically:

A block takes around 10 minutes to be mined. And a complete mining cycle halves every four years. So, it results in:

Six blocks per hour. Multiply it further by 24 (hours per day), 365 (days per year), and 4 (number of years in a blockchain cycle).

So, we get -> 6 x 24 x 365 x 4 = 210,240 ~ 210,000.

After every 210,000 the block size is halved, and each block has 50 Bitcoins. So, sum of all the sizes of block rewards becomes:

50 + 25 + 12.5 + 6.25 + 3.125 + … = 100

So, total number of coins that can be mined:

210,000 x 100 = 21,000,000.

If we talk about it in economic terms, the currency is divisible infinitely. Thus, the accurate value of cryptocurrency coins can be ignored as long as we fix a limit, which is 21 million. No doubt there can be a time when the number of mined coins reaches 21 million, and there is no more profit left unless there is a way to redefine the computations and new regulations are determined. But, that can take a while. Let us learn why.

The annual consumption of energy for mining Bitcoins has been estimated at 30TWh, which is equal to the stable energy of 114 megawatts for a whole year. Also, an individual transaction of a Bitcoin can take up power used for providing energy to about 10 U.S. houses in one day. Indeed, we can see that the energy consumption expenses for mining Bitcoins are high.

Also, if the expenses of the mined coins surpass the costs of equipment and electricity used for mining, the cost-effective and less competent equipment will no longer be needed for this industry. This activity is economically reasonable, as increasing in the mining activities will increase investment in challenging computations, which in itself becomes expensive. In fact, the difficulty in computations has escalated to some 210,000,000,000 times. Also, the overall mining capacity for computations has reached 1,500,000,000 hashes per second.

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