Mommy, Where Do Bitcoins Come From? Bitcoin Mining Explained
“Mommy, where do Bitcoins come from?” Well, you see, when a shiny young Bitcoin catches the eyes of an ambitious miner, and because they love each other very much…
Wait, that’s obviously too difficult to solve here. Besides, my whole goal is to keep things simple. Anyway, Bitcoins are made by solving complex math 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 make money mining Bitcoins are called miners. When a batch of problems is solved it becomes known as a block. Blocks are verified by other users and once they are verified, they get added to what is called the block chain. This chain continues to grow with a new block being added to it roughly every 10 minutes. This chain is really just a master ledger that will continue to grow and never end.
The very powerful machines that mine zap a lot of power and drive up the miner’s monthly utility bill. The reason it takes so much power is the genius of the mathematics involved. It requires the mining machine to perform complex cryptographic algorithms. Once a math problem is solved by the machine, a block of coins is birthed. Every time 210,000 blocks have been created, the reward to the miner is halved. It takes 4 years to accomplish this. So it’s kind of like a Bitcoin Olympics. Currently the block reward is 12 Bitcoins (on … Read more