Bitcoin mining is the discovery process through which new Bitcoin enters the market. Just as new gold and silver are mined from the ground, new Bitcoin is mined when its algorithm produces new blocks. Blocks are the new transactions and other information that has entered the network since the last block was published, forming together into a chain called the blockchain. The algorithm behind Bitcoin’s blockchain, SHA (Secure Hash Algorithm) -256, produces a new block of transactions exactly every 10 minutes. In exchange for securing the network there is a block reward that comes with every new block, currently equal to 12.5 Bitcoin. At the current valuation of $11,500 per Bitcoin, this means roughly $143,750 enters the market every ten minutes, meaning there is $862,500 of new Bitcoin every hour and $20,700,000 every day.
When the block is produced and then solved by the computers on the network, which occurs in roughly the same amount of time, that block is added to the blockchain. Whether the network’s computers are able to solve the block in more or less time than 10 minutes informs difficulty of whether to increase or decrease, respectively. Difficulty is a function of how hard it is to find the next hash, which becomes tougher the more machines are trying to mine at once. Difficulty therefore is the level of competition on the network.
Just as there is different equipment that you can mine gold and silver with, the same holds true for Bitcoin mining. Using a CPU (Central Processing Unit) to mine is the equivalent of using your hands to dig. CPU mining is basically dead at this point in time, as you’ll have a tough time earning anything more than pennies. GPU (Graphics Processing Unit) Mining is like using a pickaxe: hundreds of times more efficient than using your hands. ASICs, application-specific chips, are specialized machines made for the sole purpose of bitcoin mining, like using construction equipment to mine gold and silver. Each step in between provides orders of magnitude more efficiency into the process, making the previous style obsolete. This also reigns true within the world of ASICs, where new and improved hardware cycles every 2.5–4 years generally sends the old stuff to the garbage heap.