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Definition: Bitcoin mining


The generation of bitcoins. Bitcoin mining is how new coins are created as well as the process that adds new Bitcoin transactions to the distributed ledger known as the "blockchain." Like a gold or silver mine, which takes work and time to produce results, Bitcoin mining requires "digital work" and "processing time" to bring coins into creation. Hence the "mining" metaphor. However, this processing time uses an enormous amount of electricity worldwide (see cryptographic hash function). See blockchain.

While there are tens of thousands of nodes in the Bitcoin network that verify transactions, a smaller number are mining nodes. New transactions reside in the Bitcoin memory pool (mempool) until a miner retrieves them, becomes the first to complete a mathematical puzzle, puts the transactions in a block, waits for verification from other nodes and finally adds that block to the blockchain. At that time, the transaction is confirmed, and when another block is added, the transaction is confirmed again and so on. It currently takes about 10 minutes to create a new Bitcoin block. At times, there can be traffic jams, and waiting for a transaction to be confirmed can take a while. See Bitcoin confirmation.

Miners Are Rewarded with Bitcoins
The mathematical puzzle takes a gigantic amount of calculations to solve and ensures that miners spend time and resources, thus providing "proof of work" (PoW). The first miner to solve the puzzle and publish the block to the blockchain is rewarded with fees and new bitcoins (see block reward). If two miners solve the puzzle at the exact same time, the miner that did the most computational work is the winner. The massive digital processing required also keeps fraudulent miners away. See proof of work algorithm.

Years ago, anyone with a PC could be a miner. However, the Bitcoin algorithm was designed to be more difficult as time passes. Today, it could take a regular PC so long to solve the puzzle that it would never be first to do so. However, PCs can still be used for other cryptos (see pool mining).

Chinese Mining Pools
Organizations create huge mining pools to accomplish the task using specialized "ASIC miner" hardware. Located in China where electricity is less expensive, pools mine roughly 65% of Bitcoin transactions worldwide. In 2021, China started to crack down on Bitcoin trading and mining, and China-based miners are packing up and moving to Central Asia and North America. See miner hardware and cryptographic hash function.

The Maximum Number of Bitcoins Is 21 Million
The total number of coins will be capped at 21M at some point during the year 2140. The Bitcoin algorithm ensures that the number of new coins the miner generates for its own account slows down over time. Starting with 50 coins in 2009, by 2013, there were 10.6M bitcoins in existence, and by 2020 roughly 17M. The first four years generated 10 million coins, but the subsequent five years only six million. After 2140, the only revenue miners will receive is from transaction fees. See block reward.

The Cap Is a Major Feature
Bitcoin proponents claim that the capped total of coins is what makes Bitcoin valid money, similar to having physical gold bars. Just like an ounce of gold, the market may change its daily value, but a devaluation cannot occur due to inflating the money supply. See Bitcoin and cryptojacking.