How Does Bitcoin Mining Works

Bitcoin is the world's first decentralized digital asset, a concept introduced in 2008 by a man who goes by the pseudonym Satoshi Nakamoto. The great thing about it compared to other currencies is that you can transmit bitcoins to others directly over the internet, no matter where you are, without going through any intermediaries (e.g. banks, financial institutions).

In the Bitcoin system, there is no centralized accounting, but rather an incentive for everyone to account for Bitcoin through "block rewards". Everyone can participate in the bookkeeping. Every 10 minutes, bookkeepers across the network work together to calculate a complex math problem, and whoever figures out the answer first gets the right to bookkeeping. The bookkeeper will be rewarded with bitcoins automatically generated by the system after packaging the transaction data into blocks within a specified time period.

This reward-giving behavior is so similar to traditional gold mining that the process is also called mining, and the bookkeepers are called miners. The total number of bitcoins is constant, 21 million, and the rewards are cut in half about every four years, so in about 2140 Bitcoins will no longer be born and transaction fees will be the primary income for miners in the future.

When Bitcoin was born, miners mainly used computer CPUs to calculate math problems, but soon after someone found that graphics cards were significantly faster and more suitable for mining, and as miners gradually iterated their mining equipment, CPU and graphics card mining have basically been retired and rendered obsolete, replaced by the Asic mining machines specifically designed for mining.

Due to the gradual growth of the number of miners, mining difficulty continues to increase. In order to overcome this problem, miners have developed a mining method called "mining pools", in which they pool their hashrate and share the proceeds according to the percentage of hashrate.

As bitcoin mining has become more specialized, the requirements to become a miner have become more demanding. Finding cheap sources of electricity, building mining farms, purchasing mining machines, and mining machine operation and maintenance have become common problems for all miners.

To lower the threshold of becoming a miner, mining platforms similar to cloud servers have emerged. Miners can easily place orders from home and purchase mining packages to cloud mine bitcoins directly through a mining machine-sharing service platform, such as Bitdeer.