Bitcoin miners earned over $ 1 billion in aggregate profits last month. This is how they make money
Bitcoin is being created on a decentralized network called blockchain, where a vast network of digital miners works to verify transactions at any given time.
These miners earned $ 1.1 billion in January, which is 62% more than in December when the price of bitcoin rose to $ 42,000. The road to making such an amount is not an easy task.
What do bitcoin miners do?
Miners are responsible for auditing blockchain transactions to ensure the legitimacy of the network. They also work to avoid the double spend scenario, where the owner of the bitcoin can stealthily spend the same coin twice through duplication or falsification.
Miners don’t necessarily work as a team. They work to compete with each other to add the next block or record of all bitcoin transactions to the chain. The block contains a partial record of the most recent transactions and contains 1 MB (megabyte) of data.
The miner who receives the award will be the first of many to run through the crowds of number combinations to solve a number problem known as a proof of work and get an acceptable 64-character code. The code for this winning block helps protect the blockchain. It usually looks like the last line in this image:
If the miner solves the equation first and successfully adds the next block to the chain, he will receive a certain amount of bitcoins. Only one such block can be added at a time, and each of them takes about 10 minutes to check and attach.
Over the next 120 years, 21 million coins will be issued.
What are the awards worth?
In 2009, when bitcoin was first created, miners were rewarded with 50 bitcoins per block. But according to the order of Satoshi Nakamoto, the mining reward is halved every four years. The rewards were reduced to 25 bitcoins by 2012 and 12.5 bitcoins by 2016.
As of February 2021, miners receive 6.25 Bitcoin for each new block mined, which is around $ 330,475 based on current value. They are also allowed to deduct a transaction fee from each trade executed in that block, which costs $ 20 per trade. There are currently about 1 million bitcoin miners in operation.