The world’s largest cryptocurrency Bitcoin made history in the current month when it hit all-time high at $100,000, sparking significant discussions over this digital asset, fundamentals and how the system works in order to decide if it’s an industry worth investing money in. Bitcoin’s total supply is capped at 21 million coins, with new coins introduced through the mining process.
What is Bitcoin Mining?
Bitcoin mining, in simple terms, is the process by which new bitcoins are created and transactions are verified on the Bitcoin network.
Bitcoin mining serves two primary purposes: it introduces new bitcoins into circulation and secures the network by ensuring that transactions are legitimate and immutable. However, the process is energy-intensive, leading to environmental concerns and prompting discussions on sustainable alternatives.
What is Block Reward?
The miners compete to add the next block to the blockchain, and to be the first one to solve the puzzle and get a reward called “block reward” in cryptocurrency.
Following the last Bitcoin halving event in 2024, the rewards per block were reduced from 6.250 BTC to 3.125 BTC. This promotes bitcoin miners to keep the network stable and secure. In addition, miners get transaction fees on the transactions included in each block, making Bitcoin mining a profitable part of the Bitcoin ecosystem.
How Bitcoin Mining Works?
Bitcoin mining is the process where specialised computers validate and record transactions on the Bitcoin blockchain. Crypto miners use advanced computers to solve complex mathematical problems, ensuring the blockchain’s security and integrity. This process is known as proof of work (POW), which requires significant computational power and energy.
The first crypto miner who solves the problem, broadcasts the block on the network for verification. Once confirmed, the block is put into the blockchain, and the miner receives newly created Bitcoin and transaction fees.
How many Bitcoins have been mined?
As of December 2024, approximately 19.79 million Bitcoins have been mined, representing about 94% of the total 21 million supply. This leaves around 1.21 million BTC yet to be mined.
When will Bitcoin Mining end?
If we talk about the completion of Bitcoin mining, it is expected to end around the year 2140 when the full supply of Bitcoins is mined.
The timeline is influenced by the Bitcoin halving event, which occurs every four years and reduces the block reward by half. As a result, the creation of new Bitcoins is slowing over the period, extending the mining process for nearly a century.
After reaching the total supply, miners will no longer receive new Bitcoins as rewards but will continue to secure the network and validate transactions, earning compensation through transaction fees.
What is Bitcoin Halving event?
According to Bitcoin Whitepaper, Bitcoin halving is a scheduled crypto event that cuts block mining reward in half that miners earn for adding new blocks to the blockchain. The usual timeframe for these blocks processing is four years and, and it occurs after every 210,000 blocks on the Bitcoin network.
This system regulates Bitcoin supply and maintains scarcity over time. The most recent halving took place this year on April 19 decreasing the block reward from 6.25 BTC to 3.125 BTC. Halving frequently affects Bitcoin’s price by reducing new coin issuance, which influences market dynamics and miner profitability.
Is Bitcoin Mining still profitable?
Bitcoin mining can still be profitable but it largely depends on factors like cheap electricity costs, good mining hardware efficiency, and Bitcoin’s market price. Post 2024 halving event, profitability has decreased for smaller and solo miners due to reduced rewards per block. However, large-scale miners with access to cheap energy and advanced machinery often maintain profitability by optimising costs and leveraging economies of scale.
How much time and cost to mine Bitcoin?
To mine a Bitcoin, it takes around 10 minutes, but then it requires highly efficient computational power and participation in a mining pool. Solo miners, using ordinary equipment, may take several years to mine one Bitcoin because of network difficulty and competition.
The cost to mine a Bitcoin varies as it is based on electricity rates, hardware efficiency, and location. On an average, it can range between $5,000 and $20,000 per BTC. Regions with lower electricity costs, such as parts of Asia, offer more favourable conditions to Bitcoin miners.
What are the risks involved in Bitcoin Mining?
Bitcoin mining requires major investments in hardware and electricity. Higher costs of electric energy and competition can affect profitability, particularly among small-scale miners. Market volatility also increases financial risk, as a rapid decline in Bitcoin’s price could make mining unprofitable, leaving miners with high equipment and energy costs.
Many regions impose strict regulations on mining due to its high energy consumption. Furthermore, the environmental impact of mining’s carbon footprint has sparked criticism, potentially leading to more strict rules and limited working zones for crypto miners. Many countries have blocked Bitcoin mining after seeing how the industry can destabilise energy systems and suck-up energy supplies.
Bitcoin miners are vulnerable to cyberattacks, such as malware targeting mining machines or the hackers stealing mined Bitcoins. Hardware faults or ineffective equipment can also cause disruptions in operations. As mining complexity increases, staying competitive needs constant modifications, which raise operational costs and technical challenges.
Conclusion
Bitcoin mining remains a key component of the Bitcoin network, providing security, confirming transactions, and introducing new currency into the circulation. While it has potential for profitability, the process is energy intensive and has financial, regulatory, and environmental hurdles.
As the supply is nearing its limit, miners will focus only on transaction fees, emphasising sustainability and efficiency. Bitcoin mining is an innovative blend of technology and economics, providing insight into the future of a decentralised economy.
