What does mining mean?

The process of trying to ‘solve’ the next block’s PoW puzzle. It requires obscene amounts of computer processing power to do effectively. In the case of Bitcoin the difficulty increases every 210,000 blocks, or roughly every 4 years.

Mining is not only the method for verifying transactions and adding new blocks to the blockchain, it is also the way in which new coins are created. Miners who successfully solve the “puzzle” to create a new block are rewarded with Bitcoin (or whichever coin is being mined). They are also entitled to the network transaction fees associated with the block.

When Bitcoin was first released a miner would receive 50 Bitcoin for successfully mining or creating a new block. That reward is halved roughly every 4 years and is now just 12.5 Bitcoin. It will halve again in 2021 and will then be just 6.25 Bitcoin. This halving every 4 years will continue until all 21 million Bitcoin have been mined.

The difficulty of mining, or successfully solving the “puzzle” is recalculated every 2016 blocks, or roughly every 2 weeks. This recalculation is done to ensure that the discovery of new blocks remains constant at about 10 minutes per block. So, if the computational power of the network increases, the difficulty of mining also increases. Of course if computational power on the network decreases it becomes easier to mine successfully.

Mining has become extremely competitive, and can only be done these days using specialized hardware known as ASIC chips, which have been manufactured with one specific purpose – mining Bitcoin.