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Welcome to The Financial Performer demystifying bitcoin one newsletter at a time!
What The Heck Is Bitcoin Mining Anyway?
Imagine a world wide cyber colosseum where instead of gladiators, teams across the globe deploy armies of computers to battle it out. Every 10 minutes a new math challenge appears on the arena floor. The computers roar to life, their cooling fans screaming as they race to be the first to solve the puzzle. The prize? A cool $300,000 or about 3.1 Bitcoin. The instant someone claims victory, a new challenge begins for the next prize. Now imagine it’s happening every 10 minutes, 24 hours a day, 365 days a year! With a whopping $43 million in payouts each day, it’s the highest paid cyber event in the world, and it never stops.
That's bitcoin mining in a nutshell. And here's something wild - of the 21 million Bitcoin that will ever exist, almost 20 million are already mined! These cyber gladiators are battling it out every day for the last million coins to ever be mined.
But why do we need this global cyber competition to make digital money you ask?
Let me explain.
The Digital Copy Problem
Here's the thing about digital stuff: it's incredibly easy to copy. Think about it:
- That document you spent hours writing? Copy-paste, and someone has it in seconds.
- Your favorite song? Just one click and you can download infinite copies.
- That terrible photo you shared? Even if you delete it, someone, somewhere already has a copy!
This works great for sharing information- unless it’s that embarrassing picture that accidentally went viral. But though it works great for information, it’s terrible for money.
Imagine if you could just copy-paste your bank account balance?
Some of you are already saying, 'Good Lawd SIGN ME UP!' The only problem with copy pasting money though – is that everyone would be a millionaire, and the money would be worthless. This has always been the big problem of creating a digital money: how do you make something digital that people can’t just copy at will?
Satoshi's Brilliant Solution
Bitcoin creator Satoshi Nakamoto came up with the answer. He looked at what makes gold valuable: it's scarce and hard to get. You definitely can't copy-paste gold – and that’s what makes it valuable, you have to spend real energy and resources to mine it.
So Satoshi built the Cyber Colosseum, where instead of big machines digging through dirt, big computers dig through numbers. And just like gold mining:
- It takes real energy and work
- Only a limited amount can be found
- You can't fake the results
- Only 3.1 bitcoin for each block, not one more
Inside the Arena
This race to uncover the next bitcoin reward never sleeps. Mining teams from Texas to Kazakhstan build and maintain vast warehouses of super fast computers, all competing in digital combat for those 3.1 bitcoin every block.
Below: a massive bitcoin mining warehouse with thousands of supercomputers trying to win the next bitcoin reward.
Here's how each 10 minute round for the bitcoin reward plays out:
- A new math puzzle drops in the arena
- Thousands of computers worldwide attack the problem
- The first computer to solve, claims the victory
- They broadcast their solution to the network
- They collect their prize: 3.1 Bitcoin (worth about $300,000 in today’s price)
- Instantly, the next round begins
With a chance to win $300,000 every 10 minutes, the stakes are enormous. Mining teams spend millions on the latest computers and the electricity to run them, all for a chance to win the next block reward. Just like ancient gladiators, only the strongest and fastest are rewarded.
'Ok Rory,' you say, 'it all sounds pretty cool, but what’s stopping someone from copying a few extra bitcorns into their own wallet?'
Great question my friend!
The Blockchain Referee
This is where the blockchain comes in to play. Think of the blockchain as the Colosseum's referee – keeping a perfect record of every match, every winner and most importantly every single Bitcoin. The blockchain is the record of all the games that have ever been played, including all the winners and all the bitcoins. If someone tries to copy 100 extra bitcoin into their wallet the blockchain blows the whistle! A red card is issued and the guilty mining team is expelled from the arena and blacklisted. They are no longer allowed to compete and their ‘copy-paste’ coins are tossed out with them.
Every miner has a copy of this blockchain and every 10 minutes, when a new reward is released they all verify the record to ensure nobody's cheating, trying to copy-paste more than the 3.1 bitcoin allowed.
About All That Energy...
Yes, this high-stakes digital colosseum uses a lot of energy - enough to power small cities. Critics love to point this out. But here's what they don't mention: Bitcoin turns that energy into something remarkable - perfect digital scarcity.
For the first time in history, we have money that can't be copied, can't be faked, and most importantly - can't be controlled by any government or bank. Speaking of banks, they actually consume more energy than Bitcoin, but when's the last time you heard anyone complain about their skyscrapers lit up all night or their gas guzzling armored trucks hauling cash between vaults.
Through the global competition of raw computing power, Bitcoin solved a problem that seemed impossible: digital money as rare as gold, as secure as math, and as unstoppable as the internet itself.
Bottom Line:
- Bitcoin solved the digital copying problem
- Computers worldwide compete to secure the network
- Only 3.1 bitcoin per block- no more, no less
- The blockchain verifies every transaction
- A system that runs itself - no banks needed
You don't need supercomputers to join the Bitcoin revolution - just knowledge. Subscribe to Financial Performer for weekly insights that make Bitcoin simple without sacrificing substance.
Coming Next Week: 'Why You Need to HODL: The Power of Never Selling'
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