Let's Go Bitcoin

Where does Bitcoin come from?

To keep things simple, we can say Bitcoin is currency. You likely have at least one kind of currency you use every day unless you’re broke. In that case, move along.

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Where does Bitcoin come from?

Let’s talk mining.

To understand the process of mining Bitcoin (or making Bitcoin), you need to know that there is a limited supply - 21 million to be exact. No more than that can come off of a printing press, and none can be made counterfeit.

Each Bitcoin is infinitely divisible meaning you don’t ever have to buy an entire Bitcoin. You can easily buy just $1 worth if you feel like just getting your feet wet.

So, how are Bitcoin made? In this case, the question is really, “How are Bitcoin mined?”

Before you attempt to get a visual, let’s forget the tired old analogy of miners hacking away at rocks until they find gold. That is not what’s happening when we are talking about mining Bitcoin or being a Bitcoin miner.

Bitcoin is a digital currency, so everything we’re doing to mine Bitcoin is done digitally.

The process of mining Bitcoin is done by computer users running powerful hardware.

When you think of a Bitcoin mining rig, think of your old desktop computer. Now think of a significantly more powerful computer, and multiply that by thousands — like a warehouse full of computers — that spend all day making/mining Bitcoin. It’s expensive to set up and requires lots of electricity to keep running. Running a bunch of these monsters is known as 'mining', and the people who do that are 'miners'.

Each Bitcoin is mined by what a lot of people say is the hardware “solving a math problem.” Technically speaking, the hardware is solving a math problem, but it isn’t actually a math problem that needs a solution like 2+2. The process is more comparable to a lottery, like rolling a pair of die and hoping for the winning number to appear.

What the miners want when they “roll the die”, is a number to appear that has the correct amount of zeros.

Let’s say we’re in a mining rig and there is a miner who owns a single computer named Tina that does the mining. When Tina rolls the dice, and after many attempts, finally gets the number with the correct amount of zeros, like mentioned above, that would make Tina eligible to earn Bitcoin.

But before she gets that Bitcoin, Tina’s answer has to be verified.

The only way to verify that Tina’s answer to the math problem is valid is to ask all other miners in that rig, and on the whole Bitcoin network, to verify the same math problem as Tina’s and see if her answer was correct. Once all other miners have successfully determined that Tina’s answer was correct, Tina automatically earns Bitcoin for her mining.

No one gives Tina that Bitcoin. Tina automatically gets the Bitcoin after her answer has been verified by all other miners, due to the Bitcoin mining protocol that was written by Satoshi —something you don’t have to entirely understand as a beginner.

Here's where it gets interesting: While Tina’s answer to the math problem is being checked, the mining system is simultaneously taking part in Bitcoin transactions being logged into a public ledger of encrypted groups called blocks. Every time the system correctly guesses the number that decrypts a block, miners create and reward you with Bitcoin based on the size/difficulty of the block.

That is what we refer to as Blockchain technology, which we’ll touch more on later.

Why would anyone want to do this?

We get it. This sounds like an insane amount of work, not to mention the math and engineering knowledge a miner must have to make this all come together.

Now, take a deep breath. Being a Bitcoin user, you’re not responsible for any of this stuff. All you do is spend it and keep it safe, like your standard money.

As the community grows, the math problems get harder, meaning the worth of Bitcoin rises based on the difficulty of those math problems, as well as several other factors. Meanwhile, the transaction rates of Bitcoin being used around the world are increasing, meaning more work is required by the miners to maintain the system.

Solving the math problems (a.k.a having lots of hardware to roll the dice) is not just about earning Bitcoin, but also validating the system. Again, this is a system based on proof of work, not trust. Essentially, mining is the processing power for the Bitcoin system. If mining stops, nothing gets verified, meaning the whole system could collapse.

We just scared you a little, didn’t we? But hey, that’s okay.

We know deep down that the likelihood of the mining process stopping is low. The miners have huge incentives to keep going, and since the community has developed so much, they have already invested such an inconceivable amount of time and money into it, that it would be a huge loss if they were to stop and convince every other miner in the world to do the same.

But seriously, where does Bitcoin come from?

We know. You’re still like, “But… What? How? Huh?” Bitcoin is this technology. It’s the roll of the dice, it’s the proof of work, it’s the encrypted and decrypted blocks, and it’s the community. You can ask us where your dollar or your Euro came from, and we can tell you; it came from a printing press. We can tell you this because dollars and Euros are physical objects. We can also tell you where an apple came from; a seed that grew into a fruit-producing tree. But we can’t tell you where the Internet came from, because it’s also digital, much like Bitcoin. It’s comprised of coding, math, and the community behind it.

TL;DR

The process of mining Bitcoin is done by computer users running powerful hardware. Mining is just checking and double-checking the validity of Bitcoin transactions taking place around the world. While the validity is being checked, the mining system is also participating in Bitcoin transactions being logged into encrypted groups called blocks. Every time your system correctly guesses the number that decrypts a block, miners create and reward you with Bitcoin based on the size/difficulty of the block.