Bitcoin Mining: The Basics
If you you’ve heard of Bitcoin you’ve probably heard of bitcoin mining because it is in essence how bitcoins are created and maintained. Well not necessarily a specific bitcoin but the entire network is maintained through the mining process. In the simplest of terms to help you understand this a network of computers that use energy to solve extremely difficult math problems and the first computer to the correct answer gets a reward to mine that block and keep it on the blockchain. Did that make sense? Basically the miners pay for energy and in return get bitcoin as a reward. This goes for any other crypto that is mined however the mining processes might be different but that can be split into a week of blogs it has so much information to understand.
In one of my past blogs I have a video with Anthony Pompliano and Bill Miller where Miller does a great job explaining bitcoin in a way many are not used to hearing. While I think Miller does a fantastic job of explaining why bitcoin is so revolutionary it can still frighten people away from it because off the unknown. The description problem bitcoin has that Miller states is how Bitcoin is the fastest growing monetary and payments network that is liquid and public and you can see the status every single day 365. You have never been able to say that in history ever before. The information around bitcoin is unprecedented he states. But how can we see this and how can we trust it.
Trust there it is. Do you trust your government? How about the companies that have all of your personal information. They don’t ask you what they can and cant do with your information because they technically own it. Seems messed up because it is. With bitcoin there is no one to trust hence why it is decentralized. If you are looking for the actual technical ways in which bitcoin mining or mining in general work look up proof of work vs proof of stake and that should keep you busy for a solid week. I am here trying to give my opinion on what is important to understand about bitcoin mining and how it effects the network in mainly a positive way. I’m not here to argue if it uses too much energy because we already know it doesn’t and its actually beneficial to the environment which is the opposite of what all the fairy Greta followers thought. We are here to look at Bitcoins hash rate.
Bitcoin Hash Rate
The Bitcoin hash rate is a measure of the total computational power dedicated to securing the Bitcoin network. It represents the speed at which miners collectively solve complex mathematical problems to validate transactions and add new blocks to the blockchain. A higher hash rate indicates increased network security and computational efficiency, making it more challenging for any single entity to manipulate the system. The hash rate also plays a crucial role in adjusting the mining difficulty, ensuring that new blocks are added to the blockchain approximately every 10 minutes. As the hash rate fluctuates, miners may need to upgrade their hardware to stay competitive, and the dynamic nature of the network contributes to the decentralized and resilient nature of the Bitcoin ecosystem. Lets take a look at how the Bitcoin Hash rate correlates with BTC’s price.
Bitcoin Mining Difficulty History Chart
This chart shows BTC’s price in green and the BTC hash rate in yellow. This chart clearly shows Bitcoins Network has never been stronger. Along with the price of BTC going up for the past year has increased the number of miners to contribute to the network because the same bitcoin they would be getting paid to mine a bitcoin has gone up in value. When things go up more people want that asset creating even more demand. I think this has a lot to do with the parabolic moves you see in cryptocurrency so often. Remember the Bitcoin Halving is coming in April I believe the 19th you’ll have to double check me on the exact date but that cuts the supply of bitcoins being mined in half. About 90% of all Bitcoins are already mined with the last 10% being mined over the next 100 years about. This can show you two very simple metrics you learn in any basic econ class or just google supply and demand you’ll figure it out I promise. If you know the basics when it comes to supply and demand when demand goes up and supply goes down what happens? You guessed it the value must go up! More people want the same thing. Now there will be even less of the asset available. Hmmmm I wonder what that will do to the price of BTC. We can look and see the demand for mining Bitcoin has never been higher and its higher by lets say a lot…. And in three short months the supply will basically get cut in half, not actually but that’s what the market will fell. With this knowledge you should be long term bullish on bitcoin. If you read this and took the time to understand what I am trying to say and you still think BTC is failing go buy Cardano. Or better yet stay in cash or bonds and treasuries, have fun going broke and paying for the U.S. debt that they cannot control. I hate Joe Biden by the way just thought I would throw that in there. Not a huge politics guy but hey I was smart enough not to vote for joe Biden probably the most hypocritical man to ever step foot in the oval office.
P.S. Thanks for reading the OhzoneCrypto Blog! I hope you guys are enjoying these blogs becayuse they arnt stopping anytime soon!