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What is mining and how does it work? (Simplified)

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By solving mathematician problems, miners are verifying transactions and adding them into the blocks. Miners are getting two types of rewards for their work after the creation of every block.

What type of reward miners get?

Firstly, miners get the block reward. For every block that was created, there is a certain amount of Bitcoins that goes to the miners.

If the miner verified transaction that was added to the block, he is going to receive his part of the share.

The second reward is the fee that is paid by users for verifying their transactions.

Miners require a lot of computational power.

The more the power you have, the more the chances you have that you are going to find first the solution to the mathematical problem because only the first who solve the problem is going to receive the reward. 

The increase of miners will cause an increase in difficulty of solving the mathematical problem.

It means that miner reward will decrease.

That’s why mining is currently considered as not so profitable because it requires a lot of computation power and what is an even bigger problem is that you are competing with mining conglomerates with enormous mining power and your chances to be the one that is going first to find the solution are not so big.

Mining is deflationary which means that the number of mined coins is dropping.

As it is declared by bitcoin white paper, every four years mining reward is halved.

Currently, miners are getting 12.5 Bitcoins per block.

As it was defined in the white paper, the last Bitcoins will be mined around 2140.

What will happen once all Bitcoins are mined?

Once the last Bitcoin is mined in 2140, miners will still be rewarded for processing transactions in fees.

By then, blocks will also be larger so more transactions will be in each block giving miners a larger aggregate of fees.

Considering that by 2140 the increase in price will happen and also increase in the number of transactions in each block, it leads to conclusion that mining will still attract interest.

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