Digital currencies have changed the world forever when they appeared some ten years ago, and they continue to shift it forward at a rapid pace. Bitcoin, as the leader and the most valuable crypto asset, is so popular that people who are not that tech-savvy know about it and find it fascinating. In a recent couple of years, especially from the end of 2020 until now, digital currencies seem to be bigger than ever, if something like that is even possible. This largely has to do with the new fascination of mining Bitcoin and other currencies, something that was thought to have stopped years ago. So why are the miners again motivated to do what they do best on the blockchain network? What changed?
About Crypto Mining
As this is a decentralized digital cryptocurrency that operates on the blockchain network that is by design a peer-to-peer based system, there is not actually a central authority or specific institution which is responsible for the approval of the transactions in the network. This makes it different from other financial and government bodies and institutions that have strict laws and require overly complicated bureaucratic approvals and paperwork.
In other words, traditional systems have external parties and mediators that make the cut and oversee everything. With digital currencies, there are no such external parties involved that oversee the operations the users and customers perform in the network. But for the blockchain network to function normally, Bitcoin mining is a necessary process that is conducted by the miners that validate the transactions, and by doing that, they work to keep the network safe. Moreover, through the famous process of mining, new BTC is created until it eventually becomes capped and no more of it is available.
With this being said, mining is also an essential process for the supply of BTC. And, as there are over 4.8 million Bitcoin users currently doing their thing, mining is even more important than it was in the past. The recent jumps in value and the newfound interest from millions resulted in more miners appearing all over the world which is so prevalent that prices of hardware components skyrocketed. But miners no longer operate as they used to when Bitcoin was initially released.
Nowadays, the individual miner who uses its own computer is an extinct species. It is no longer as efficient and optimal, so the mining is mainly done on mining pools and farms where numerous rigs work together around the clock and provide the owners with new BTC. However, the main incentives for mining remain the same, and here in the article, we are going to explore some of the main motivations for miners.
The Block Reward
The main incentive for mining is the block reward. Satoshi Nakamoto, the founder of Bitcoin, created the blockchain system that rewards the miners for solving complicated equations and algorithms because of how vital it is to keep miners satisfied. Otherwise, since they will not work on the network for anything, the cryptocurrency, as well as the blockchain technology, would not be successful.
What is more, he also knew that he needs to regulate the inflation rate, especially when there does not exist an authority to control the available supply. Hence, an event was programmed called Bitcoin halving, which occurs whenever a total of new 210,000 BTC are mined, and it takes about four years to happen. This is when Bitcoin drops in value and s few of such events have taken place so far.
In the beginning, they had a huge incentive to mine because the block reward was 50 BTC. One BTC is worth $55,000 at the moment, so it is easy to see why such an amount cannot be given out any longer. As time went on and three halvings reduced the block reward, mining got even more costly. Nowadays miners receive much less for their work while they need more computational power which requires more expensive hardware and larger electricity bills. At the moment, the reward is only 6.25 BTC, down from 12.5 and 25 before that.
This means that online trading sites are a lot more popular when it comes to obtaining BTC currently and mining is second to that. So, investors can set up an account in just a couple of minutes on an innovative trading site like https://the-bitcoinpro.com/. The training site is based on AI technology, which means the site is very popular among beginners because they do not need to have extensive knowledge of Bitcoin in order to invest or trade here. What is more, you can follow the simple instructions on the site to get into trading. The minimum deposit is $250, and you can potentially earn up to $1250 in just 8 hours of trading there, with good business moves and smart decisions backed up by knowledge and research of course.
Another incentive that offsets the costs of mining are transaction fees. First, we need to be aware that some of the costs related to mining include electric energy, computing power of your equipment, high-quality computer system, or specialist mining equipment, and by that, we mean special computer systems that can mine successfully on the blockchain network. Therefore, there are a lot of costs actually related to mining, and this is why a lot of people that are getting into mining by joining mining pools and farms.
But either way, the block reward is a substantial part of the main incentive. Knowing this, people are motivated to keep mining because they also have another advantage which is voting on subsequent changes in the network.
As you can tell, miners have important responsibilities on their hands and mining is not only time-consuming, but it is also very expensive in 2021. It has been for more than a few years while yielding less and less rewards. Because of this, and to balance things for everyone in the business, they are the ones that get to vote on any proposed change in the blockchain network. The number of votes is based on the computing power the miner has in the network. In summation, this is why mining is still popular because these changes affect every user, regardless of its status as a miner or investor. As long as there are miners out there who care, it will be a popular activity and a potentially lucrative career choice.