There are a lot of aspects to the Bitcoin mining ecosystem. Many outsiders see this as a waste of resources, particularly when taking into account how miners receive a small reward for doing so. But the mining process is not just about money; it is also a way to secure the Bitcoin network. More importantly, it is what makes Bitcoin tick, and how consensus is achieved.
Bitcoin Mining Is More Important Than You Think
When talking about Bitcoin mining, the majority of people see it as a way to make money by using their computer. While it is still possible to mine with a regular computer, the electricity costs far outweigh the earnings for the majority of enthusiasts. This is also part of the reason why Bitcoin mining is often referred to as being “wasteful”.
The Bitcoin mining process requires a lot of electricity, and the average reward miners earn is relatively small in comparison. Then again, this reward also depends on how high the Bitcoin price is at that given time. If the stars and planets align, Bitcoin mining can be [marginally] profitable for home miners.
What most people tend to forget is how the Bitcoin mining process is not just about the financial reward. Every miner who joins the network, regardless of hashpower, aids in decentralizing the protocol even more. As the Bitcoin protocol becomes more decentralized, it also becomes more secure. For some miners, this is the far bigger reward than the Satoshi they earn from the computation work itself.
But the most important aspect of Bitcoin is achieving consensus on the network. Transactions need to be validated and require the majority of miners to agree they are either valid or invalid. This consensus is achieved through the proof-of-work concept itself, which makes Bitcoin very different from other types of value in the world today.
This brings us to the point of debate of how financial institutions want to use Bitcoin technology. The biggest aspect they seem to oversee is the consensus mechanism, which validates transactions and records. Proof-of-work makes it cost-ineffective to disrupt the immutability of the blockchain.
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