Mining is a concept that allows Bitcoin to remain functional. It is a major contributor to fueling the cryptocurrency’s global rise.
In the background, this has been made possible by rapid advancements in technology. From GPUs to ASICs to cloud mining, the Bitcoin mining of today is certainly different and much more efficient than it was a decade ago.
In this blog post, we will look at how Bitcoin mining works, along with its history and evolution over the years.
What is “Mining”?
Bitcoin mining works with users (aka ‘miners’) that contribute resources in the form of ‘computational power’ to keep the Bitcoin blockchain running. In return, they are rewarded with newly created Bitcoins as a payment for their efforts.
The process is based on the ‘Proof of Work (PoW)’ mechanism, where miners solve complex numerical problems to earn their reward. This also makes it possible to confirm transactions on the bitcoin blockchain.
Because there’s a finite supply of 21 million Bitcoins, Proof of Work (PoW) is intended to make the numerical problem solving procedure more difficult over time. This incentivises miners to pool in more computational power to solve them.
As a result, Bitcoin is also able to scale because of the added computational power over time. Ultimately, this mechanism of mining keeps bitcoin operational.
Two Types of Mining
Mining can be done by one user on their own or by a collection of users together, the former is called solo mining, and the latter is called pool mining.
In solo mining, only one user is executing the mining process and there’s no mining pool involved. But in pool mining, multiple users join forces and each user gets a calculated “share”. The Bitcoin reward received is split between all members of the pool.
The Timeline of Bitcoin Mining
- Genesis, And the Days Of Yore
The Bitcoin blockchain was started by mining the “Genesis Block” on Jan. 3, 2009, by the creator of Bitcoin, Satoshi Nakamoto using Bitcoin Core (the first Bitcoin Mining software).
At that point, the Proof of Work was very simple and could be calculated with CPU power alone on virtually any computer. But that changed as the popularity of Bitcoin increased.
- GPU Mining, A New Way To Mine
With Bitcoin surging in popularity, the CPU-based mining software was quickly becoming inadequate for calculating increasingly complex Proof of Work (PoW) problems. To address this issue, miners turned to their more powerful GPUs that could solve the problems faster.
The first GPU-mined block was mined by a Bitcoin owner with the username ArtForz on 18th July 2010. The first publicly available GPU mining tool was made by user Puddinpop and shared on the Bitcointalk forum.
- The ASIC Uprising
The development of Application-Specific Integrated Circuits (ASICs) in the early 2010s marked another major turning point in the evolution of Bitcoin mining.
ASICs are hardware devices specifically designed to mine Bitcoin. They are much more efficient because they are purpose-built to perform the mathematical calculations required for mining Bitcoin. As a result, they perform these calculations much more quickly and efficiently than other mining hardware.
- Where We Are Today
The mining scene today is more competitive than ever before. With Field-Programmable-Gate-Array (FPGA) mining hardware that is supposably more efficient than even ASICs.
Another way to mine is through cloud mining – a user can simply rent out server power on a subscription from a cloud mining service provider. Miners are using this approach to avoid the costs of expensive hardware and electricity.
The Roadway to Future
Bitcoin mining is an interesting and lucrative endeavor – with its tools and techniques evolving rapidly. If you want to jump into this fascinating world, stay tuned, as we bring you all the information you need in this educational series.