Bitcoin mining is a method of generating or finding bitcoin money. Moreover, unlike the fiat currency that is issued, bitcoin does not have a physical structure, but is generated by analytical methods.
Bitcoin maintains a public ledger containing previous transactions, and mining is the method of adding new transactions to that ledger. Bitcoin price has been performing great lately. The important question here is when will it end? Let’s take a look at this.
What is Bitcoin Mining?
The Bitcoin blockchain is often defined as a database that is cryptographically protected and therefore fixed. The technology that ensures this stability and security is cryptographic hash.
The purpose of so-called mining is not the need for an actual digging action. Bitcoin is an all-digital token that doesn’t need critical mining, but it has its own style of research and modification, which is where the terminology “mining” comes in.
Bitcoin is powered by millions of computers around the world called “miners”. This arrangement of computers includes the same purpose as the Federal Reserve, but there are some notable exceptions. Like the Federal Reserve, bitcoin miners record transactions and verify their accuracy. However, unlike these basic managements, bitcoin miners are reached from all over the world and save transaction data in an unlimited list that is available to anyone.
Bitcoin is created using the so-called mining method. Network members calculate solutions for a mathematical task every second to protect the network. If you are the first to correctly calculate the solution, you will receive Bitcoin as a reward. The protocol states that this award is halved every 4 years. It started with 50 Bitcoins per block. Scientifically, the result is a geometric series approaching zero.
At some point, the block reward becomes so small that it can be neglected. If everything goes according to protocol and doesn’t change, the last bitcoins will be created around the year 2140. Then there will be 21 million bitcoins in circulation. The end of bitcoin mining will have an impact on the entire system.
Nowadays, the block reward guides miners to mine bitcoin and secure the network. When the block reward is zero, there are only transaction costs left to the miner. These currently make up a small fraction of the total fee and amount to around 0.7 BTC.
The block reward is currently at 6.25 BTC, so the miner receives a total of 6.95 BTC for each generated block. This would be enough if the block reward was zero. There’s no need to explain what happens when the block reward gets smaller and smaller. Will there be transaction costs that users are willing to pay enough to guarantee a secure hashrate? Will Bitcoin exist in its current form in 2140? Will the protocol be changed to allow more inflation? We will see this in the future.