The entire system of bitcoin is a collection of computers that run on blockchain technology. A blockchain is a type of database that stores data in blocks that are chained together. Each block consists of a collection of transactions. All transactions done on this system are transparent and can be seen through a public ledger.
When one block is filled with data, it is connected to the previous block. In this way, all the data in blockchains are linked together in chronological order. Bitcoin uses blockchain to ensure decentralization so that no single person or a group will have full control over it. The price of bitcoin depends on the forces of demand and supply and no external forces can affect its price.
The data entered in decentralized blockchains can’t be erased or taken back. All the transactions done in blockchain technology are permanently recorded and viewable to anyone who looks at the public ledger of bitcoin.
Bitcoin mining is a process through which a bitcoin is released into circulation. It involves solving extremely difficult puzzles to discover a new block, which is then added to the blockchain. Blocks are files of data where bitcoin transactions are permanently recorded.
The puzzles required to solve by bitcoin miners in the process of mining are computationally difficult. It means that the puzzles are so complex and complicated that even supercomputers find it difficult to solve these puzzles easily. Present-day bitcoin miners use supercomputers and advanced hardware to mine bitcoins.
Bitcoin mining verifies the bitcoin transactions taking place across the entire network. This process is necessary to maintain the public ledger of transactions because this process helps to verify the transactions and also adds a new bitcoin into circulation.
When bitcoin transactions take place anywhere across the world over the bitcoin network, the bitcoin miners collect all these transactions together in blocks and add them to the public record also known as the blockchain.
When bitcoin miners solve these complex math problems on the bitcoin network, they produce a new bitcoin. By solving computationally difficult puzzles, bitcoin miners make the bitcoin payment network trustworthy and secure by verifying its transaction information.
Bitcoin miners are awarded bitcoin after they successfully add a new block of transactions to the blockchain. Bitcoin miners are not compensated with money. This is because money is a centralized currency and the whole concept of bitcoin is to ensure decentralization of transactions.
The reward that bitcoin miners receive for verifying the transactions across the network is halved after every 210,000 blocks. A bitcoin halving event is when the reward for mining bitcoin transactions is cut in half. In 2009, the reward given to miners for completing one block of transactions was 50 BTC. In 2020, the reward for adding a new block into the blockchain is 6.25 bitcoins.
The circulation of bitcoins is not unlimited. There can only be 21 million bitcoins to ever exist throughout the entire network. Once miners have completed mining this number of bitcoins, the supply of bitcoins will be over. It is estimated that all of the 21 million bitcoins will be mined and be in circulation by the year 2140.
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Source: https://medium.com/why-and-how/how-does-bitcoin-mining-work-e227c7af638b?source=rss——-8—————–cryptocurrency
