You may ask yourself
“where do Bitcoins come from ?” Bitcoins aren’t printed out
like traditional money, they are mined out of the system. A miner is just a person with a computer
that runs a mining program on it. The reason it’s called mining is because: Just like any other natural resource,
there is a finite amount of Bitcoins. The maximum amount of Bitcoins
that can be generated is 21 million. Until today
over 12 million Bitcoins were mined. Just like real world mining, you need to invest energy
in order to extract these Bitcoins. These miner’s computer needs to solve
complex mathematical problems, and once it solves them, new Bitcoins are generated
and awarded to him.
But miners don’t just generate new Bitcoins. They also use their computers to
verify transactions and prevent fraud. So more miners means
faster transaction verifications and less fraud. That’s why we want to compensate miners
for their hard work. When verifying a transaction the miner gets a small fee
out of that transaction for his work. So Miners get paid twice; once for verifying the transactions and again when they successfully
generate new Bitcoins. Sounds profitable? Well, not so fast. Satoshi, the guy who invented Bitcoin, wanted the number of Bitcoins
that were mined each time to remain constant, no matter how many miners come aboard. That’s why the difficulty of mining increases
as more miners join the network. In 2009 you could mine 200 Bitcoins
with your personal computer at home. In 2014 it will take you
about 98 years to mine just 1… That’s why ASIC miners were invented.
Super powerful computers
designed just for mining Bitcoins. But since so many miners have joined
in the past few years it’s still almost impossible to mine alone. To solve this problem
mining pools were invented. Groups of miners formed together to deal with
the growing difficulty of Bitcoin mining. Each miner gets paid
for his relative share of the work. So that’s how Bitcoins are born, through miners. For more information
visit 99Bitcoins.com A non-technical blog about
Bitcoin and cryptocurrency..
