What is Bitcoin Mining? – New Zealand’s easiest Mining Guide

Cryptocurrerncy mining rig red

What is Bitcoin Mining?

Since Bitcoin operates on a decentralised blockchain where no single individual, company or government is in control of the network, there needs to be a consensus system where someone or something will validate and authenticate Bitcoin transactions in a fair, tamperproof way.

This is the role of a  Bitcoin miner, otherwise known as a user who leases out their computers’ computational power to autonomously facilitate and verify transactions in real-time. Bitcoin miners are also known as nodes. ⚡

A Bitcoin node can just be your laptop running Bitcoin mining software, or it can be a fully-fledged Bitcoin mining supercomputer, but the result is all the same. You run a program on your computer that runs and maintains the Bitcoin network, in return for the Bitcoin network rewarding you with BTC.

miners mining bitcoin

When a node is mining, it is simply working out and completing a series of cryptographic mathematical problems, which entails talking to all the other nodes on the network in a synchronized fashion.

The Bitcoin miners coherently time stamp blocks of data entries (transactions), whilst simultaneously sharing the data with the rest of the network to prevent the double-spending of coins, AKA- the doubling up of entries into the blockchain.

bitcoin coin in pile of coal

The incentive to be the first node to solve the problem is that for every ‘block’ a Bitcoin miner solves or facilitates, a small reward is granted by the network to the node. When the network rewards a miner, it simply sends some Bitcoin to the wallet that is linked to miners’ machine.

This is how Bitcoins blockchain network runs in a decentralised fashion, as the powerhouse of the network are stand-alone miners wanting to profit for their own interests.  A blockchain like Bitcoin is not powered by one individual, but rather by mass collaboration powered by collective self-interest.

complex price trading tech infographic

Since these blockchain entries are universally stored between all nodes on the system, in combination with the fact that the blockchain is 100% transparent, its possible to view the state of any ongoing payment in real-time- as well as the Bitcoin networks entire transaction history and the balance of any wallet that you know the address to.

For this reason, Bitcoin is not truly anonymous, despite how many think Bitcoin is untraceable. Bitcoin is pseudonymous, meaning that your transaction and wallet history is 100% transparent, however, your identity is not tethered to your wallet by default. Anyone can easily create as many Bitcoin wallets as they want without having to provide their ID, and the only way that someone can link a wallet to you is if you give it to them when making a purchase or receiving Bitcoin.

man mining computer screen with pick axe

What is the 2020 Bitcoin halving?

Since the price of Bitcoin is expected to increase over the years as more people buy Bitcoin and start using it as a currency or store of value, the blockchain has an inbuilt event to cut the reward in half for mining a block, once every 210,000 blocks. This was a feature implemented to balance out the reward so there will always be an incentive for miners. You can learn more about this here.

Tap dripping Bitcoin gif

Can Anyone Mine Bitcoin?

Yes, anyone with a computer can mine Bitcoin in New Zealand, however, there is a big difference in the profitability of using an 800$ laptop vs a dedicated mining rig.  These set-ups can cost thousands of dollars per unit, and they can be pooled together into huge mining supercomputers, like the image shown below. 

Massive cryptocurrency Mining Pool

How much Energy does Crypto Mining Consume?

The amount of energy that is used up to mine bitcoin alone is just over 1% of the worlds energy output, about the same as the total energy consumption of Portugal.

You can, however, hook up your mining rig to a renewable energy generator, like a solar farm, to theoretically mine cryptocurrency indefinitely without having to pay a dime, apart for the overheads for the system components and maintenance themselves.

Clean green crypto mining renewable energy

Some alternative cryptocurrencies have different consensus systems, ones that use much less energy and can be much faster than Bitcoins in its current state. You can learn more about the different consensus systems here.