Bitcoin Mining Difficulty & Pre-Mined Coins

Bitcoin is often called "digital gold," but mining it is far more challenging than extracting actual gold. While gold may still be hidden deep underground or in space, Bitcoin is strictly limited to 21 million coins.
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In previous lessons, we explored the fundamentals of mining and how mining pools function. As Bitcoin has gained popularity, more people have joined the mining process, making it significantly harder over time.
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This lesson will cover two key concepts: Bitcoin mining difficulty and pre-mined coins.

Contents

• Why is Bitcoin hard to mine?
• What happens after all 21 million Bitcoins are mined?
• What does pre-mined mean?
• Examples of pre-mined cryptocurrencies
• Pros & cons of pre-mined coins

Why Is Bitcoin So Hard to Mine?

Bitcoin mining is a process of solving complex mathematical puzzles to verify transactions and add new blocks to the blockchain. Miners use their computational power to find the correct hash, which is as difficult as searching for a needle in a haystack.
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To maintain network stability, Bitcoin’s code was designed to ensure that a new block is mined approximately every 10 minutes. When more miners join the network, Bitcoin automatically adjusts the difficulty level, making it harder to find new blocks.

Early mining was much easier—miners could use regular PC processors (CPUs).
As difficulty increased, miners switched to graphics cards (GPUs) and then specialized chips (ASICs).
Today, solo mining is nearly impossible for most individuals, which is why mining pools have become popular.

What Happens After All 21 Million Bitcoins Are Mined?

Since Bitcoin has a fixed supply, what happens when all 21 million coins are mined?
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Even after all Bitcoins are in circulation, miners must continue their work to keep the blockchain running. However, they will no longer receive block rewards.
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So, why will miners continue mining?
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Because mining is not just about earning block rewards – it is also about verifying transactions and securing the network.
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Instead of block rewards, miners will earn transaction fees.
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New blocks will continue to be created, but the incentive structure will change.
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It is estimated that the last Bitcoin will be mined around the year 2140, at which point miners will have to rely entirely on transaction fees to sustain the network.

What Does Pre-Mined Mean?

Some cryptocurrencies do not require traditional mining. Instead, a portion of their total supply is created and distributed before the coin is officially launched. These are called pre-mined cryptocurrencies.
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Examples of pre-mined coins: Ripple (XRP), Cardano (ADA), Stellar (XLM).
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Pre-mining is similar to stock options: a company distributes shares to early investors and employees before going public. In crypto, developers and contributors receive tokens as a reward for building the project.

Examples of Pre-Mined Cryptocurrencies

Ripple (XRP): A pre-mined cryptocurrency used for fast and low-cost transactions, primarily in collaboration with banks. A significant portion of the XRP supply is controlled by Ripple Labs Inc.
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Ethereum (ETH): Ethereum initially pre-mined Ether for developers and later used Proof of Work mining, but it has since transitioned to Proof of Stake, eliminating mining entirely.

Pros & Cons of Pre-Mined Coins

Pros:

• Provides proof of functionality to early investors.
• Ensures developers and contributors get paid for their work.
• Encourages early adoption of the cryptocurrency.

Cons:
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• Risk of "rug pull" scams, where scammers sell pre-mined coins at high prices and then abandon the project.
• Pre-mined coins are more vulnerable to market manipulation and pump-and-dump schemes by large holders who obtained them for free or at significantly reduced prices.

Conclusion

Bitcoin mining has become more difficult over time due to increasing network participation. The fixed supply of 21 million coins ensures Bitcoin remains scarce and valuable.
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Meanwhile, pre-mined coins provide an alternative model, rewarding developers early and funding projects before launch.
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In our next lesson, we will explore how cryptocurrency mining regulations vary across the world. 

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