Unlike fiat, which is generated by the government of a country, Bitcoin is not made or created, neither are various other cryptocurrencies. Every one of the cryptocurrencies that exist is either pre-mined or they have to be mined. In the case of Bitcoin, the coins have to be mined using high computational power. This high-speed computing is employed in the consensus mechanism of Bitcoin that it uses to verify the transactions that are being made on its blockchain. This mechanism is called proof of work.
In order to unlock a block and receive any amount of Bitcoin, the miner has to solve the problem of high complexity. This problem is not the kind one might have to rack their brains for, rather it requires great computational power to guess a 64-digit hexadecimal number, commonly referred to as a hash. This hash would unlock a block, providing Bitcoins as an incentive for the work that has been done. Hence the name, Proof of Work (POW).
Mining Bitcoin used to be easier just about 10 years ago, but as more and more of these coins were mined, the harder it became to mine them, as the reward or incentive, which is bitcoins, was halved with passing time which meant that generating a hash became a more arduous task as more bitcoins were mined. At first, the halving took place after the first 4 years. After that, it came more frequent.
The amount of computational power that is required to unlock a single block is ginormous. That is why highly powerful computational chips are required. This could also just be narrowed down to whoever has more power for mining or generating hashes per second has a greater chance of unlocking a block. The bigger the mining farm, the bigger the fruit will be reaped.
There has been a lot of debate regarding whether consuming an enormous amount of electric power to compute hashes is more profitable than it is detrimental. This is due to the fact that the reward has been decreasing whereas the energy required to generate hashes has been increasing. Owing to the high volatility of Bitcoin prices, it hardly seems to be a very profitable feat for miners, especially the ones that are a part of a mining pool where the reward is divided amongst the pool members.
In addition to this, the cost of the computational machinery that has to be acquired to perform computation has to be considered as well. This ranges anywhere from $1000 to $5000. The amount of energy that is consumed to power these high-speed GPUs can power entire countries. The carbon print that is attributed to the nonrenewable energy sources, from which the energy to run mining farms is collected, is astonishingly huge.
Furthermore, even if a person amasses a huge amount of computational power through tons of GPU’s is it necessary that they will be able to reap the benefits. The answer to that is no. In order to unlock a block, THE hash has to be generated, and that can be done any miner, but very unlikely so. The chances of making a right guess increase, if you can make a ton of them at a very high speed.
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