MGT Capital Investments, Inc. (OTC: MGTI)
Office (914) 630-7430 Email IR@MGTCI.com
Bitcoin mining is the process by which new bitcoins are created and transactions are securely added to the Bitcoin blockchain—a decentralized digital ledger that records every transaction across the network.
Miners are individuals or organizations that use specialized computers to validate and confirm transactions. Their job is to group transactions into blocks and add those blocks to the blockchain in a way that prevents fraud and ensures accuracy.
To add a block to the blockchain, miners compete to solve a difficult mathematical problem, also known as a “hash puzzle.” This process is called Proof of Work. It requires significant computational power and energy.
The first miner to solve the puzzle gets to:
Add the new block of transactions to the blockchain.
Receive a reward in the form of newly created bitcoins (called the block reward) plus transaction fees from the transactions in that block.
Mining serves three critical purposes:
Secures the network: By making it extremely costly to attack or alter the blockchain.
Validates transactions: Ensuring that bitcoins are not double-spent or manipulated.
Distributes new bitcoins: Introducing new coins into circulation in a decentralized, rule-based way.
The difficulty of the hash puzzle adjusts every 2,016 blocks (about every two weeks) to ensure blocks are added approximately every 10 minutes.
The reward for mining also halves every 210,000 blocks (roughly every 4 years) in an event called the Bitcoin Halving. This limits Bitcoin’s total supply to 21 million coins, reinforcing its scarcity.
In Bitcoin’s early days, anyone with a personal computer could mine. Today, due to increased difficulty and competition, mining is dominated by:
Mining farms: Large-scale operations with thousands of high-powered machines.
Mining pools: Groups of miners who combine their computing power and share the rewards proportionally.