There are broadly two ways you can own a bitcoin—by receiving it from someone who already has it, or mining it on your computerWhile theoretically, anyone can mine a bitcoin, the probability of even super-powerful computers to mine and earn a bitcoin is minimal. using websites such as www.bitminter.com.
Now, if you decide to be a bitcoin miner, you basically take the responsibility of maintaining the ledger of transactions where bitcoin is involved as a currency.
Let’s say John wants to buy a $2 coffee from Sally’s coffee shop.
If he were to buy this coffee using a debit card, he would swipe his card in the card machine.
And the card machine will send his details to the bank, which would confirm if he has $2 or more in his account to complete this transaction.
As his transaction is approved, the bank reduces the balance in his account book (ledger) by $2.
Now imagine that John decides to pay using a bitcoin (and not a debit card), and so, no bank is involved.
So, everything that the bank was doing (approving and updating ledger) will instead be done by bitcoin miners like you (total miners are estimated to be 1 million and all miners need to do it).
This is how it will work: Both John and Sally will download a Bitcoin wallet from PlayStore or App Store, and so, each of them will be given a bitcoin address.
Now assume a Bitcoin is worth $2, and to buy a coffee, John pays a Bitcoin from his Bitcoin address to Sally’s Bitcoin address.
And to do this, John’s transaction will be broadcast to all Bitcoin miners who will add this transaction to others happening around the same time—all these transactions happening together are called a block.
A typical broadcast like John’s has sender/receiver information, date & time, a unique transaction code, and a message.
The miners’ powerful computers convert this information into a random code called Hash, a 64-character long string that looks like b9755f726801fc5eda1b3a33dda55796ba9619b37.
As another new transaction gets added to this hash, this existing string gets converted into another entirely different 64-character string.
With every additional transaction, the existing string gets changed to a different 64-character string.
While all this is happening, the miners’ computers are also participating in a competition to be the first to lodge this block in the public ledger and win the prize of the next issuance of bitcoins (their incentive).
On average, 144 blocks are mined per day, and each block generates 6.25 bitcoins, thereby generating 900 bitcoins in a day.
The current bitcoin system is configured to produce only 21 million bitcoins, and 18.5 million out of those have already been produced (mined).
