Mining bitcoin

What is 'Bitcoin Mining'
Bitcoin mining is the process by which
transactions are verified and added to the public
ledger, known as the block chain, and also the
means through which new bitcoin are released.
Anyone with access to the internet and suitable
hardware can participate in mining. The mining
process involves compiling recent transactions
into blocks and trying to solve a computationally
difficult puzzle. The participant who first solves
the puzzle gets to place the next block on the
block chain and claim the rewards. The
rewards, which incentivize mining, are both the
transaction fees associated with the
transactions compiled in the block as well as
newly released bitcoin.

BREAKING DOWN 'Bitcoin Mining'
The amount of new bitcoin released with each
mined block is called the block reward. The
block reward is halved every 210,000 blocks, or
roughly every 4 years. The block reward started
at 50 in 2009, is now 25 in 2014, and will
continue to decrease. This diminishing block
reward will result in a total release of bitcoin
that approaches 21 million.
How hard are the puzzles involved in mining?
Well, that depends on how much effort is being
put into mining across the network. The
difficulty of the mining can be adjusted, and is
adjusted by the protocol every 2016 blocks, or
roughly every 2 weeks. The difficulty adjusts
itself with the aim of keeping the rate of block
discovery constant. Thus if more computational
power is employed in mining, then the difficulty
will adjust upwards to make mining harder. And
if computational power is taken off of the
network, the opposite happens. The difficulty
adjusts downward to make mining easier.
In the earliest days of Bitcoin, mining was done
with CPUs from normal desktop computers.
Graphics cards, or graphics processing units
(GPUs), are more effective at mining than CPUs
and as Bitcoin gained popularity, GPUs became
dominant. Eventually, hardware known as
an ASIC, which stands for Application-Specific
Integrated Circuit, was designed specifically for
mining bitcoin. The first ones were released in
2013 and have been improved upon since, with
more efficient designs coming to market.
Mining is competitive and today can only be
done profitably with the latest ASICs. When
using CPUs, GPUs, or even the older ASICs, the
cost of energy consumption is greater than the
revenue generated.