Crypto Incentives – Bitcoin and Mining
General - August 25, 2020
Unlike cash, Bitcoin cannot be printed. Its created by a process called mining. So, what is Bitcoin mining? In this video, we talk about what Bitcoin mining is and how Bitcoins are actually created.
Bitcoin is basically a code. In order to generate this code a certain amount of work has to be done. A miner has to prove that he has done the work. If he proves it he receives a reward. This is called proof of work, and the reward is Bitcoin. So, Bitcoin is the reward given to a miner when he has completed some work.
Let’s talk about the work. For mining, ‘work’ is solving computational mathematical problems. These can only be solved with a computed, and a reall good computer at that. In the early 2010s a gaming laptop could solve these problems. Now, acres of mining farms are used.
Why mathematical problems? These mathematical problems are ways of confirming and placing a transaction in a block. These confirmed transactions in one block are chained with other blocks. Hence, the word – blockchain.
When the transactions within the block are confirmed (by solving the mathematical problem) the block is ‘generated.’ The person who confirmed the block will receive Bitcoin as a reward. Currently, that reward amount stands at 6.25 BTC per block. This amount drops by half every four years. The last time this changed was in May 2020. Before that the reward was 12.5 BTC per block. In 2024, the reward will be 3.125 BTC per block.
Through this mining process, Bitcoin remains valuable, secure and limited.
Enjoy the video!
Please subscribe to get more videos like this and leave a comment on what you’d like us to discuss next