What_is_Bitcoin_Mining_for_Beginners_-_Short_and_Simple(360p)

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Transcript

00:00You may ask yourself, where do bitcoins come from?

00:04Bitcoins aren't printed out like traditional money, they're mined out of the system.

00:08A miner is just a person with a computer that runs a mining program on it.

00:12The reason it's called mining is because, just like any other natural resource, there

00:16is a finite amount of bitcoins.

00:19The maximum amount of bitcoins that can be generated is 21 million.

00:23Until today, over 12 million bitcoins were mined.

00:27Just like real world mining, you need to invest energy in order to extract these bitcoins.

00:31These miners' computers need to solve complex mathematical problems, and once it solves them,

00:36new bitcoins are generated and awarded to them.

00:39But miners don't just generate new bitcoins, they also use their computers to verify transactions

00:44and prevent fraud.

00:45So more miners means faster transaction verifications and less fraud.

00:50That's why we want to compensate miners for their hard work.

00:54When verifying a transaction, the miner gets a small fee out of that transaction for his

00:58work.

00:59So, miners get paid twice.

01:01Once for verifying the transactions, and again when they successfully generate new bitcoins.

01:06Sounds profitable?

01:07Well, not so fast.

01:09Satoshi, the guy who invented bitcoin, wanted the number of bitcoins that were mined each

01:13time to remain constant, no matter how many miners came aboard.

01:17That's why the difficulty of mining increases as more miners join the network.

01:22In 2009, you could mine 200 bitcoins with your personal computer at home.

01:26In 2014, it will take you about 98 years to mine just one.

01:31That's why ASIC miners were invented.

01:34Super powerful computers designed just for mining bitcoins.

01:38But since so many miners have joined in the past few years, it's still almost impossible

01:42to mine alone.

01:44To solve this problem, mining pools were invented.

01:47Groups of miners formed together to deal with the growing difficulty of bitcoin mining.

01:51Each miner gets paid for his relative share of the work.

01:54So, that's how bitcoins are born, through miners.

01:57For more information, visit 99bitcoins.com, a non-technical blog about bitcoin and cryptocurrency.