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  • Writer's pictureSatheeish Subramaniam

Crypto Mining: 101

What is Crypto Mining?

Crypto Mining is the only process by which new cryptocurrencies are entered into circulation; it is also how transactions are confirmed by the network.

Crypto Miners receive cryptocurrencies as a reward for completing "blocks" of verified transactions, which are added to the blockchain.

Rewards are generated by the machine validating transactions and mining new tokens( Proof of Work (POW)).


Crypto Mining as a Service (CryptoMaaS)

GPU (Graphics Processing Unit) or an application-specific integrated circuit (ASIC) and significant electricity consumption are required to set up a mining rig and to mine competitively.

Individual miners may not have access to high hashrate machines or competitive electricity prices or a suitable environment.

The current trend in crypto mining is CryptoMaaS, where Miners can use shared processing power in a remote or off-site server farm.

The longevity of Bitcoin Mining

As of Oct 2021, there were around 18.8 mil bitcoins in circulation, out of a projected total of 21 mil.

Given the rate at which bitcoin is "mined", the final bitcoin won't be mined until the year 2140. Over the next 20 years, transaction fees will become an increasingly important source of revenue for miners.

Block Rewards & Transaction Fees

A bitcoin miner's earnings comprise of Block Rewards and Transaction Fees. Once the projected total of 21 mil bitcoins are mined, no more bitcoins will be mined. However, transaction blocks will still be confirmed, and transaction fees are expected to become a significant source of revenue for miners in 10 or more years from now.

Mining one block today would yield over USD 350,000 vs USD 12,5000 in 2017.

In 2009, mining one block earned a miner 50 BTC reward. The reward halves, on average, every four years. It is currently at 6.25 BTC. However, the increase in the price of 1 BTC means the miners get a far higher payout.

Source: Investopedia article date Sep 2021 authored by Euny Hong, Investopedia's former supervising editor and author of two critically acclaimed books.

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