In a world slowly moving towards the digitalization of the payment systems that have been around for thousands of years, Bitcoin is the leader that paves the path for all the late-comers. With ups and downs in the past 11 years since digital currency has first stepped into the world, we can say that it has been a long journey. The worth of bitcoin has exponentially increased over the past years sitting around $39000 as of writing this article. Not a bad price for a digital currency, right?
More and more people are investing in Bitcoin making it even more popular as each day passes by. Even though there are backlashes for energy consumption, the currency is still moving strong. Talking about energy consumption, have you ever wondered how Bitcoins are generated? We all know that it is some kind of a program allowing users to send and receive numbers that virtually exist. But how exactly does that work? What is the process that happens when a new bitcoin out of the 20 million (that will ever exist) has to be generated? Let’s take a look.
You might be familiar with the term if you have been playing with Bitcoin for a while. Mining is the process of providing resources for the bitcoin network to process transactions. From a powerful GPU to a dedicated server with resources that can solve complex calculations are being used for mining. So, in short, bitcoin mining is what generates new bitcoins to the market by a competitive and decentralized process.
Every time the miners help the network to complete a block of transaction, they are rewarded with bitcoins. So, they will receive rewards in bitcoins without having to spend real money on purchasing it. Like any other resources in real life, as there is only a limited abundance of bitcoins in the world, as much as the digital currency gets mined, the reward of mining gets decreased.
In other words, as time passes and more people start mining bitcoins using their powerful rigs, it gets harder for everyone else to earn bitcoins through mining. “Survival of the fittest” is the primary rule here. Those who have better mining rigs with extremely powerful processors and GPUs that can complete complex calculations within minimal time will obviously get rewarded more than those who don’t.
As we mentioned in our recent articles, the value of bitcoin will also depend on factors such as availability. As it gets harder and harder to mine bitcoins, or one day, when every single one of the 20 million bitcoins finally gets into circulation, the demand for the currency will increase. That means, everyone will have to spend real money on purchasing bitcoins rather than mining them using their computers.