Like gold and other precious metals, Bitcoin can be ‘mined’, but the process is very different.
And depending on the day, it could be a lot more lucrative: at the time of writing (6 July 2021) one Bitcoin was worth $45,149. One ounce of gold is worth around $2,387.
So what actually is Bitcoin mining?
While Bitcoin might be worth more than gold, it’s also a lot more expensive to mine - about four times more.
According to the chief operating officer of Mawson Infrastructure Group - Australia’s largest Bitcoin mining operation, which is actually situated in the US - Liam Wilson, crypto mining involves using supercomputers to provide security to the crypto network.
“By providing security to the network, we are rewarded with Bitcoin,” Wilson told Yahoo Finance correspondent Jason Dundas. “That’s how Bitcoin comes into circulation.”
For reference, there are only 21 million Bitcoins in the world. Nearly 19 of them are in circulation, meaning there are less than three million of them yet to be ‘mined’.
What does ‘providing security to the network’ actually mean?
You can think of Bitcoin mining like auditing.
When verified, every Bitcoin transaction, or block, is grouped together to form a chain: a blockchain.
So, the blockchain is like a full transaction history of Bitcoin that dates all the way back to when the first Bitcoin was mined in 2009.
In return for verifying the transaction, miners are rewarded with Bitcoin.
What’s involved in terms of hardware, power and set up?
You can’t use your everyday Apple Mac to have a successful Bitcoin mining operation.
“The first thing you need is power, so you need access to an abundance of power,” Wilson said.
“We then go and purchase the miners… chock the container full of miners, turn the power on and begin solving something called the SHA-256, which is the algorithm and then we’re rewarded in Bitcoin.”
And these containers are really hot - and loud.
“They run it between 70 and 85 degrees celsius, and they push out the hot air.”
How do the computers mine Bitcoin?
Just like every human has a unique fingerprint, digital blocks have the same thing: the SHA-256 algorithm.
To solve the algorithm, miners need to cycle through every single possible combination until they find a result that matches the hash.
That code is then used as an identifier for the block, which stops it from being tampered with in the future.
But to do this, these computers need a ton of energy. Literally.
Studies have found crypto mining can produce 3 to 15 million tons of global carbon emissions per year.
And this isn’t good news for the environment.
Am I guaranteed to get Bitcoin in return for mining?
Not every Bitcoin miner gets Bitcoin in return for verifying transactions. In fact, you need to be the first miner to arrive at the right - or the closest - answer to be rewarded with Bitcoins.