What exactly is Bitcoin mining, and how does it operate?

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WHAT IS BITCOIN MINING?

Bitcoin mining is the process of creating new bitcoins by solving extremely complicated math problems that verify transactions in the currency. When a bitcoin is successfully mined, the miner receives a predetermined amount of bitcoin.

Bitcoin is a cryptocurrency that’s gained wide popularity due to its wild price swings and surging value since it was first created in 2009.

As prices of cryptocurrencies and Bitcoin have skyrocketed in recent years, it’s understandable that interest in mining has picked up as well. But for most people, the prospects for Bitcoin mining are not good due to its complex nature and high costs. Here are the basics on how Bitcoin mining works and some key risks to be aware of.

Bitcoin mining statistics

  • A miner currently earns 6.25 Bitcoin (about $125,000 as of September 2022) for successfully validating a new block on the Bitcoin blockchain.
  • Creating Bitcoin consumes 94.2 terawatt-hours of electricity each year, more than is used by Kazakhstan or the Philippines, according to the Cambridge Bitcoin Electricity Consumption Index.
  • It would take nine years of household-equivalent electricity to mine a single bitcoin as of August 2021.
  • The price of Bitcoin has been extremely volatile over time. In 2020, it traded as low as $4,107 and reached an all-time high of $68,790 in November 2021. As of September 2022, it traded for about $20,000.
  • Odds of solving for a hash: 1 in 22 trillion
  • The United States (35.4 percent), Kazakhstan (18.1 percent) and Russia (11.2 percent) were the largest bitcoin miners as of August 2021, according to the Cambridge Electricity Consumption Index.

UNDERSTANDING BITCOIN

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