Topic: Where does the money come from when mining? - page 2. (Read 16407 times)

Thanks for your explanation this really helped.
I am only still struggling with this answer:

"Why will miners mine?  Because of the transaction fees, because the miner who adds a block to the block chain gets to keep all of the transaction fees for that transactions that were in that block."

Can you maybe explain this a little more detailed?

From me, but as my employee, you only get half of the profits.  So I pay you $10 for each bitcoin you make.

How's that for a deal?

There is a third purpose, to secure the blockchain against a brute force attack.

Bitcoins aren't actually "found".  They are paid to the miner who adds a block to the block chain.  Currently the miner who adds a block to the block chain pays him/herself 50 Bitcoins.  After there are 210,000 blocks on the block chain (we're in the 130,000s now) that fee goes down to 25 Bitcoins, every 210,000 blocks it halves again.  So, eventually the fee will be below 1 BTC for adding a block.

However, blocks have to be added to the block chain, otherwise transactions cannot be confirmed.  Without confirmed transactions, the entire system breaks down.

So, blocks will continue to be added.
Miners will continue to pay themselves, up to the full 21,000,000 coins.
Miners will continue to add blocks, even when all the coins are "found", because they will be paid by getting to keep all of the transaction fees that are on the transactions in the block (which is why there HAVE to be transaction fees, think of it like a sales tax paid to the miners).

1. You dont get money from mining... you get Bitcoins..which you can then exchange for money, from an Exchange House like MtGox or you can exchange Bitcoins with other users for goods or services that they sell.

1.5. Money only appears after you give someone your Bitcoins and they give you currency.

2. The profit comes from the exchange rate the Exchange House will buy your Bitcoins for. Example: User A wants to buy 1 Bitcoin for 10 Euros. User B wants to buy 1 Bitcoin for 15 Euros. If you exchange(sell) your Bitcoin to User B you make 5 more Euros over User A and if you calculate for how much you sold the Bitcoin minus the electricity cost your computer used and other expoenses (internet,video card,purpose built hardware) ...the thing left over, thats your profit.

3. The Bitcoin itself is not a touchable Thing.. its an idea. That idea is signed with a mathematical hash and that hash is what people are trading around because it represents the time and effort it took to calculate that hash.  They are exchanging the value of that time and effort.

4. How much is your time and effort, to do something, worth?

-Shad3d

It's a fiat currency just like the US dollar.  Backed by nothing.

No, CURRENTLY mining serves two purposes:
1)  Expand the economy by mining bitcoins and putting them into the market (currently 50/block solved)
2)  Confirm Transactions

In the future, when all of the Bitcoins have been mined (around 2030 and 21,000,000 coins), mining will not generate new coins.  At that point mining will only be for confirming transactions (by adding them to the block chain).

Why will miners mine?  Because of the transaction fees, because the miner who adds a block to the block chain gets to keep all of the transaction fees for that transactions that were in that block.

If miners didn't exist, neither would Bitcoin.


Miners don't create money, they "find" it.  Just like miners of gold don't make gold.  Resources are expended to mine for Bitcoins (electricity, hardware to mine (which wears out and has to be replaced), and time) just like they are expended for mining for minerals.


Miners are able to do whatever they want with the Bitcoins they receive and/or are paid.

Your question is one of economics and is a question for everyone who owns Bitcoins.  How do you realize the value of a Bitcoin?
The same way you realize the value of a Dollar/Euro.  You spend it on something else that has value to you.

So, miners can buy products, services, and entertainment with them.  Or on exchanges, they can buy other currencies (like Dollars and Euros).  Some just hold them, hoping they'll be more valuable in the future than they are today.

drug addicts and speculators. google "silk road"

So if iam understanding right this mining is only to generate new coins so they will that will get into your wallet (the bitcoin economy) at a X rate?
If the above is true then the following statement als must be true.

A static low amount of EURO/USD paid for the Electricity -> 1 BTC -> 15 EURO/ 18 USD  (rounded and based on the current exchange rate)

So at the end you are creating money since you started with a X low amount of USD/EUROS paid for the electricity wich you can turn into Bitcoins by mining them and wich also are more worth in USD/EURO or any other daily life currency then you started with/put in. And 1 BTC is not realy earned by doing some usefull computing calculations wich would be the explanation that you earn money by mining, right?
So where does the money come from that pays you for mining or even better said, pays you for the profit you create for your self? This cannot be the system since then as explained above you would be creating money out of thin air.
And creating money is not legaly possible, right? So at the end the only explanation for that you get money for mining is that somebody pays you the differential in real USD/EURO for mining/calculating nothing  (sorry) ?

So to rephrase my question. Where does the USD/EURO come from that pays your profit you get when mining?

They are generated when a specific mathematical equation is solved by the mining software. Since it can't cheat (=must use brute force approach) and since the system is well designed (=mining difficulty) not "BTC mining flood" can occur.

You! And they aren't useless since they generate bitcoins for you.

No. You get it from the system itself.

No, because it costs at least the electricity.

Dear BitCoin Community,


Iam very new to this whole thing.
I like the whole idea and even am mining a bit with my old pc.
I get the whole system except one thing..

Where does the money come from when mining?
Who pays for these useless calculations?
I mean at the end you simply get money from a other person when mining right?
Or is this simply money for free?  (if we don't look at the electricity bills ofcourse)

EDIT: Some other question just raise up into my mind.
Can Bitcoin collapse if 95% of all people suddenly leave cause Google made a announcement of some kind?

Thats all for now.


Thanks in advance.

-Grouver-