Bitcoin is worth more than $40,000 but it wasn’t always like this. The cryptocurrency was once just a small project that enthusiasts worked on, discussed on obscure forums. They came together to imagine a new world with new economic rules and started using complex tools to make that dream a reality.
Those tools were the blockchain, which inevitably resulted in Bitcoin mining. While many people may not be familiar with it now, mining is fundamental to the overall Bitcoin economy. It’s how new coins are minted, and how many people still fill their wallets.
To learn more about Bitcoin mining, and how Bitcoin emerged into what it is today, just keep reading below!
When Was Bitcoin Developed?
Bitcoin was the first cryptocurrency to ever launch on the internet and at first, it was not given a lot of attention. The people who mined and exchanged Bitcoin were mostly avid fans on obscure forums. They used their personal computers to mine Bitcoin, putting hundreds of coins in their wallets.
In those days, Bitcoin was not worth what it is now. In fact, when Bitcoin hit more than $10, people thought they were rich! Many sold their coins for a few months of rent, not knowing how much the coin would explode in the years to come.
To be exact, Bitcoin started in 2009, partly as a response to the global economic recession. One person authored a paper that discussed the concept of cryptocurrencies and Bitcoin. He wrote under a pseudonym – Satoshi Nakamoto.
Satoshi Nakamoto is the Father of Cryptocurrency
Nobody knows who Satoshi really is, and that ambiguity has only added to the mythos of cryptocurrency. Just as the true owner of a wallet is hard to find, Satoshi has stayed anonymous. Even after fathering an entirely new wave of investments and technology, he is still anonymous.
Satoshi could be a single person, a group of people, or even your neighbor. In the paper, Satoshi described how a currency based on Blockchain technology could decentralize the world economy. He described the complex technology that would go into it while also hinting at the social ramifications.
People would be able to act as their own banks, removing power from the people who led the world to a recession in 2008. And since Blockchain technology operates as a way to validate transactions and guarantee true values, people may not even need banks at all.
They could exchange funds knowing that the money a person claimed to have was actually there. All they had to do was check a long ledger of transactions from the Blockchain, calculated through Bitcoin mining.
Bitcoin Mining Fuels Its Economy
Bitcoin mining is a term used to describe how Bitcoins are actually minted. Because of the way blockchains work, there can only ever be 21 million coins in existence. However, the world is not expected to reach that cap anytime soon; it is expected to happen in the year 2140.
It is expected to take so long partially because of “bitcoin halving,” a technological feature of the cryptocurrency. it reduces the rewards for Bitcoin mining, disincentivizing it and helping exchanges emerge naturally as a result of basic profit motives.
Instead of mining Bitcoins like the original users were doing on old forums, people start trying to buy Bitcoin. Over time, the cost to successfully mine Bitcoin gets higher and higher with slimmer profits. To mine Bitcoin now, you need to already have a lot of money to start with.
Bitcoin Mining in a Nutshell
Computers in a Bitcoin mine are constantly running complex calculations, looking for answers to incredibly long mathematical questions. Those questions tie into the cryptocurrency’s economy.
The calculations are a part of verifying when exchanges take place, ensuring that they are legitimate. When a computer is running a Bitcoin mining program, it is actually connecting to the massive Blockchain network. Then, it is going through different wallets and tracks when Bitcoins arrive and leave them.
These are called “blocks” of transactions, and solving a block results in new Bitcoins being minted. Those new Bitcoins go straight to the owner of the Bitcoin mine. But because of “Bitcoin halving,” that reward gets smaller over time, making the whole process more and more costly.
Building a Bitcoin Mine Takes Work and Investment
Right now, Bitcoin mines cost millions of dollars to set up on your own. There are massive facilities all across the world filled with computers running high-end hardware. All that hardware does is run computations, helping the Blockchain find its value.
Average people simply cannot set up Bitcoin mines like this on their own. They are usually the result of massive, international businesses working to get some profit off the Bitcoin economy.
Large Mines Can Lead to Community Concern
In the U.S. some cryptocurrency mines have led to community resistance. These mines require a lot of power and some solid infrastructure to run. However, some are popping up in rural communities that may not be able to fully support them.
The people in these communities may not even know what is Bitcoin. They usually do not see how having a Bitcoin mine can benefit their community, and usually resist businesses trying to build them. So if you’re interested in starting a large-scale Bitcoin mine, be careful where you build it!
Individual Miners Usually Join Pools
Large-scale Bitcoin mines are hard to create and are usually only done by big businesses, but there are still opportunities for individual miners. They can join online pools, giving collective mining efforts their computers’ resources. Then, when the mining pool solves a block, they can be paid based on the resources they gave.
Antpool is one of the biggest mining pools and is based in China. One of its key features is its high hashrate – a measurement of its security. While Bitcoin mines generally don’t need to be concerned about hacking, Bitcoin mining pools do.
Hackers can get access to the pool’s biggest wallets and take them for themselves, stealing money from pool owners and miners alike. To prevent this, they encrypt communications between computers. The more it is “hashed,” the harder it is to decrypt.
Joining a mining pool is also simple. Miners just need to put the pool’s address into their mining software, designate the resources they want to contribute, and voila! Once they connect a wallet to their account, they will start getting consistent payouts.
The Blockchain Is For More Than Cryptocurrency
While Bitcoin is built off of blockchain technology, it can be used for much more. Other kinds of cryptocurrencies are emerging that hold different kinds of values. It is also being used to fulfill contract-based applications, opening a whole new realm of technological possibility.
And it all started with just an anonymous person, or group of people, in 2009 who wrote a paper. They wanted to show that the future was bright despite the crushing economic reality of the time. And now, Bitcoin cryptocurrency is playing a major role in global politics and beyond.
People are building the future of cryptocurrency and the future of Bitcoin. You can learn more about how to be a part of that future here.