What is Crypto Mining?
When discussing cryptocurrencies, you will often hear the words mining and halving. Crypto mining and halving are processes which are intertwined and essential to the function of cryptocurrencies. Below, we’ll walk you through the basics of both the terms, Crypto Mining and the Bitcoin Halving.
Crypto Mining
Crypto mining is the essential process used to verify all transactions on a blockchain. And this process results in the slow accumulation or creation of new cryptocurrency. The mining process is usually performed by a large number of high-power computers which consume power in order to solve difficult math problems in a Consensus Algorithm known as “Proof of Work”.
In a nutshell, when someone submits a transaction to the blockchain, this transaction is sent to a node, which is another word for a computer that is mining cryptocurrency. The node then works to solve math problems and verify it with the other nodes in the system. Once this is done, the transaction is added to a block, and when the block is full, it is added to the blockchain. This process creates or mints new cryptocurrencies into the market supply, which is then given to the node as a reward for solving the equation. This is how miners earn the money that they need to keep these nodes running.
Bitcoin Halving
Although it may seem like the aforementioned mining process can go on forever, for some blockchains, this isn’t the case. There are cryptocurrencies, such as the famed Bitcoin (BTC) that have a maximum amount of cryptocurrency they can produce. This is known as the supply hard cap. In Bitcoin’s specific case, as the hard cap is approached, Bitcoin undergoes a process known as the halving. Because of this, Bitcoin is also known as disinflationary (as opposed to inflationary or deflationary as a fundamental of its monetary policy.)
After every 210,000 blocks (or about every 4 years) uploaded to the Bitcoin blockchain, the amount of Bitcoin the miners are rewarded with per block is halved. This occurs about every four years and this was implemented in the Bitcoin blockchain protocol to help control the inflation rate of the coin as it reaches its maximum issuance of 21 million Bitcoins. The current Bitcoin reward per block is 6.25 Bitcoin. This number is expected to halve to 3.125 in 2024. The final halving where the Bitcoin reward block is ultimately 0 Bitcoin is expected to happen around the year 2140.
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