Jack gives Mike a 20 dollar note — it can be a duplicate or counterfeit — not a possibility in Bitcoin transaction; first, because it is totally online; second, the transaction history is shared in the form of “blocks” with a lot of ledgers (in plain words: account books) distributed across the internet as chains, hence termed as blockchain. Someone breaking into a single ledger and counterfeiting Bitcoin is out of the question — all ledgers are redundant and will be automatically updated with all transaction records — it’s like syncing your phone contacts to the cloud, except that you cannot delete any number.
Why I’m talking about Bitcoin transaction? Well, Bitcoin miners are the one who provides redundancy and security to those transactions in the blockchain, and in the process gets rewarded with new Bitcoins. I’ll tell you how.
All transaction records are stacked as blocks to be kept secured and redundant. The process of stacking blocks requires solving a complex mathematical problem as programmed by the inventor. A miner takes the job of solving that math problem using powerful computers, which makes the transactions secured, and in the process, new Bitcoins are generated as winnings.
Random Hashes (Image by Sabrina Jiang © Investopedia 2021)
Miners generate “hash” — a 64-digit hexadecimal number — as a key to make a block. By “generate,” I actually mean: “guess.” It’s a guessing game for miners. Who will solve the math problem first depends on how fast they can generate hash; thus, increasing their probability of guessing the correct numbers. Therefore, the miner with the highest “hash rate” is higher up in the game.
Higher hash rate doesn’t come cheap. It requires a lot of computing power. In the early days, it was possible to generate Bitcoins with personal computers. Then, miners started using GPU (30 times powerful than CPU in mining game). Soon after, FPGA (Field Programmable Gate Array, 100 times faster than CPU) entered the game. Now dedicated ASIC (Application Specific Integrated Circuit) is used, which is customized for the sole purpose of Bitcoin mining. The choice of hardware depends on many complicated factors, not going in there now — not an expert here.
Why mining is getting power-hungry?
The answer is simple: big mining farms with larger computing power is competing with each other in a connected network to solve the math problem, who do you think will win? Pulling a straw against big guns doesn’t work.
“Mining difficulty” increases with “mining power” (Image self-made by author)
Can we mine as much Bitcoins as we want?
No; one (01) Bitcoin is generated every 10 minutes, regardless of how much computing power miners use.
The total generation of coins is halved every four (04) years (or every 210,000 new blocks or coins). A miner could get 50 Bitcoins in 2009 for solving each block of the math problem, which halved to 25 in 2013, 12.5 in 2018, and 6.25 in 2020. At this rate, block mining will stop in the year 2141, and the total supply will stop at 21 million coins. Then the miners cannot mine anymore Bitcoins as per the mathematical algorithm, making it a rare material like gold; smart, no?