Many people may be wondering about Bitcoin mining and may even be considering pickaxes, dirt and finding fortunes in the soil. However, there isn’t much difference between bitcoin mining and actual mining.
Bitcoin mining is just as uncertain as mining buy it is performed by high powered advanced computers which are able to solve complicated computer mathematical problems. The odds of the computer actually solving one of these problems is arguably 1 in 6 trillion. Bitcoin can be described as a global ledger system that makes a record of transactions between one person and another.
What is the result of bitcoin mining?
Its result is twofold: when the computer solves this complicated maths problem on the bitcoin network, they then produce new bitcoin and by solving these complex maths problems, the network becomes trusted and secure.
What is cryptocurrency mining?
People are more likely to trust physical money rather than virtual or digital money. Bitcoin is not regulated by any central authority instead it is backed up by millions of computers throughout the world called miners. These computers perform the same task as the Federal Reserve Bank, Visa, and MasterCard. Bitcoin miners are scattered throughout the world and record transactions in a public list which anyone can access. A sale or purchase using bitcoin is called a transaction, and you can buy and sell bitcoin safely online. These transactions, whether they are made in-store or online, are documented by banks and physical receipts. Bitcoin is much the same and achieves the same effect without actually having these institutions. They do this by gathering transactions together into blocks. They are then added to a public account known as a blockchain.
How does blockchain work?
When bitcoin miners add a new block of transactions to the blockchain, they must ensure that the information is accurate and error-free. They must also ensure that these transactions are not duplicated, which is known as double-spending. With digital currency, information is easily duplicated and reproduced, unlike printed currencies.
On average, about 600 000 purchases and sales occur every day which makes it very difficult to verify each transaction. Miners are compensated and rewarded whenever they add a new block of transactions to the existing blockchain. The amount of new bitcoin that is released with each mined block is known as the block reward.
How does bitcoin mining work?
In order for miners to make money from verifying transactions, they must:
- They must first verify 1 megabyte of transactions
- In order to add a block of transactions to the blockchain, miners must solve very complicated computerized maths problems.
Mining is in essence, guesswork and arriving at the correct answer before another miner does, is all about how fast your computer can solve hashes. A hash is a 64-digit hexadecimal number.
What is bitcoin mining actually accomplishing?
- Issuing new bitcoins – miners are awarded a new bitcoin every 10 minutes. Miners cannot cheat the system because this rate is set in a coded format.
- Confirming transactions – A transaction will only be considered secure once it is in a block. This is the only time it is embedded in bitcoin’s blockchain.
- Security – Miners make it difficult for people to attack, alter and stop the bitcoin network. The more miners that are mining, the more secure the network becomes.
How to mine bitcoin
- You will need bitcoin mining hardware – You will need an ASIC miner to mine, these are specialized computers that were created solely for bitcoin mining.
- Select a mining pool – you need to select a mining pool otherwise you will not receive a mining payout. By joining a mining pool, you also share in the hash rate of the pool.
- Get bitcoin mining software – This will help you to get your mining hardware hooked into the mining pool.
- Ensure that bitcoin mining is legal in your country of residence – It may not be an issue in most countries but ensure that it is legal in yours.
- Is bitcoin mining going to be profitable for you? Are you aware of what must be done to start? Run some calculations to determine if bitcoin mining is lucrative for you.
In modern times, bitcoin mining is competitive and can be done with great returns using an up-to-date ASICs and one computer is often not enough to compete with mining pools. A mining pool is a group of miners who come together to combine their abilities and thus split the bitcoin that is mined between each individual.
Mining is very interesting, but must only be entered into if you have the time, patience, right equipment and an understanding of how to mine.
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