What are cryptocurrencies? What is Bitcoin? How are these mined? We answer frequently asked questions about crypto.
A cryptocurrency is a digital value system that allows people to exchange money across the world without the need for a third-party like a bank or financial institution.
Originally developed in 2009 by it’s mysterious creator Satoshi Nakomoto, Bitcoin is a cryptocurrency that facilitates fast, secure, peer-to-peer transactions on a decentralized blockchain network. It is currently the largest and most widely-used cryptocurrency in the world.
Bitcoin mining is the process of verifying blocks of transactions and adding each new block to Bitcoin’s network. Each block of transactions has a complex mathematical hash function associated with it that requires significant computing power to solve. The miner who solves the function first receives a Bitcoin reward for supporting the network and adding a new block to the blockchain. A higher mining hashrate corresponds to increased mining success.
Yes, any decentralized cryptocurrency that’s powered by a Proof-of-Work algorithm can be mined. A few of the most popular coins to mine today are Bitcoin, Ethereum, and ZCash.
Bitcoin’s Total Hash Rate (TH/S) is an important metric that conveys the overall power of all the miners on the network. The higher the total hash rate, the faster and more secure the network will be.
Mining difficulty refers to the complexity of the cryptographic code that must be solved to add a new block of transactions to a blockchain. It is an essential part of any decentralized blockchain that relies on miners and a Proof-of-Work algorithm. Mining difficulty is adjusted every 14 days, based on the overall hashrate of the blockchain network. It is important for maintaining the integrity of the network and ensuring that the flow of Bitcoins stays at a consistent rate to avoid inflation.
Mining difficulty does not directly impact mining rewards. The mining reward only changes during a Bitcoin halving event.
A Bitcoin halving is a periodic event that cuts the reward for mining a block in half. This occurs approximately every four years. Since the Bitcoin network is designed to have a fixed number of Bitcoins in circulation, halving is necessary to prevent inflation and keep the network stable.
Halving lowers the available supply of new Bitcoins and drives demand higher. Historically, halving events have driven up the value of Bitcoin in the process, thus maintaining the incentive for miners to remain active.