Bitcoin Mining

Bitcoin mining secures the Bitcoin network, confirms transactions and releases new coins into the Bitcoin ecosystem. Here is a brief look at how it all works.

The Bitcoin halving is an event that happens approximately every four years, when the bitcoin reward miners earn for finding a new block is cut in half. This algorithm reduces Bitcoin's inflation rate and enforces its scarcity.

When all bitcoin have been mined, miner revenue will depend entirely on transaction fees. The cost of transaction fees and purchasing power of bitcoin will likely adjust higher to the lack of new supply.

Proof-of-Work and Proof-of-Stake are two consensus mechanisms which solve the Byzantine Generals Problem for distributed networks. Bitcoin uses Proof-of-Work because of its superior security guarantees and resistance to centralization and capture.

Proof-of-Work is a mechanism which allows decentralized networks to arrive at consensus in a trustless manner. The Bitcoin network relies on Proof-of-Work to build and maintain the state of the blockchain.

Bitcoin mining is taxed differently than investing in bitcoin, and can generate multiple taxable events. Several state governments have enacted pro-Bitcoin regulation to support business activities in their states.

Bitcoin mining is a competitive industry with economies of scale. In order to take advantage of economies of scale and smooth revenue streams, smaller mining operations join mining pools and share hash rate and rewards.