In my last post we discussed the bitcoin network and it’s security. The topic of mining naturally is part of that.
Let’s now dig into how bitcoin mining works....
Bitcoin Mining
Bitcoin Mining in its most basic form is the action of generation new coins until the full supply of 21 million coins is reached. To go another step, mining is the process of solving mathematical equations using algorithms in order to discover new coins.
This isn’t the only thing mining produces though. Granted, without miners new coins would not be found, but it would also mean transactions would not be confirmed on the network.
If you remember, bitcoin transactions require confirmations. Those confirmations are attained as each new block is formed.
Miners are solving blocks in order to discover new coins. Since bitcoin transactions are recorded in a block of data they are also by default generating confirmations for bitcoin transactions with each block they discover.
21 Million Coins
You may be wondering the same thing as me:
- What happens when all the coins are mined?
Luckily new coins are not the only incentive for miners. They also earn transaction fees for the transactions included in the next block that they mine.
It will be interesting how fees are impacted once all 21 million coins are mined.