Welcome to the latest article by D1. We’ve received a few questions over the past few weeks and one that really stuck out to us was just how bitcoin was created and how transactions are processed securely. The process can be long and complex, but thankfully we have computers to do most of the hard work. Let’s take a look at the massive workload we put our computers under in order for cryptocurrencies to function.
One term we will need to be familiar with is a process named ‘mining’. This process, not unlike diamond mining as we’ll see together further into the article, forms the essential backbone of the bitcoin network. ‘Miners’, or the people running the computers that help the bitcoin network, are individuals who have almost mastered the art of fine tuning their hardware in order to maximise the speed and efficiency of the bitcoin network.
What kinds of computers are needed to mine bitcoin?
When it comes to bitcoin, the network relies on what’s called a proof-of-work function to both process a transaction and generate new bitcoin. This function originally could be run on a computer at home, however with the complexity of the process nowadays, it’s almost impossible to run a singular home computer to mine and earn bitcoin.
So what kind of computers are used, if the basic home computer is not up to snuff? Well, there is many options, even for those with access to only a home computer. There exists sites, such as NiceHash and Honeyminer, that help users pool computer power and gives them a level playing field with the competition. Through these, a user can earn bitcoin by teaming up with computers from around the globe when presented with a transaction and split the work with everyone. Then the reward is split among them equal to the work they contributed to the transaction.
For those looking to keep the whole pile for themselves, there is also the option of running a more powerful mining system. These can be split between two different types, a GPU rig or an ASIC.
GPU stands for Graphics Processing Unit. These are typically attached to high end graphics cards and are incredibly agile in processing capabilities. The GPU’s are also easy to obtain since high end computers have become commonplace as gaming enthusiasts increased greatly in number.
ASIC, or application-specific integrated circuit, are incredibly powerful and fast, however they are nearly inflexible in what they can do. This means that if there is a change to an algorithm they are programmed to function with, they are rendered useless as the chip itself would have to be changed in order to function once more.
All of these specialized devices bear a strong allusion to the equipment used when mining diamonds.
From the diggers utilized to remove diamonds from the ground, to the exact specifications that a mineral must achieve to be considered a diamond.
Is the math behind cryptocurrencies really that hard?
To call the formula behind bitcoin complex is an understatement of the century. It truly shows just why cryptocurrency is called (crypto) currency, highlighting its roots in cryptography. While we could try to fully write the math here, Coindesk has created an excellent write-up on this located here. It’s definitely worth the read if you want a high level understanding of how bitcoin really works under the hood.
For those that don’t want to concern themselves with a headache, we have a very basic and helpful analogy to explain the bitcoin process:
Imagine bitcoin as an envelope. This envelope doesn’t say much on it, besides “I’m a bitcoin”. However inside this envelope is a stack of receipts that vary in number. This stack of receipts creates that bitcoins ledger acting as proof that it is a real bitcoin.
When a person decides they want to spend their bitcoin, they give the envelope representing their bitcoin to a miner who then opens the envelope and pores over the ledger confirming each transaction with the system and the authenticity of the ledger provided. This is to insure that someone didn’t create a false envelope and filled it with similar receipts, trying to spend that bitcoin twice. Once the miner confirms that this specific list of receipts have not been sent to anyone, he adds a new one bearing his mark of approval, and it reaches the new owner, who can then send it to a person of their choosing.
For their hard work, the miner then receives his own bitcoin envelope, with a receipt labeling it as a brand new bitcoin and the transaction it was created on. And so the cycle perpetuates.
For obvious reasons, this example doesn’t cover anywhere near the larger intricacies of bitcoin. However for those just starting out, it’s been a great and easy-to-understand analogy that has brought us much success.
Diamonds and Bitcoin aren’t so different after all
These processes of a miner checking the transaction record closely and analyzing for any mistakes closely mirrors the process of identifying and grading a diamond. Flaws must be catalogued and defining traits of a diamond may be used to identify it again in the future, proving the diamond is real. While anyone can pick up a diamond to look at it, locating all of these flaws and learning how to properly grade a diamond can take years to master, making the diamond graders similar to the mining rig operators of the bitcoin world.
With these similarities, you can start to draw comparisons between the mining of diamonds and the mining of bitcoin. Between having to go through a complicated process to the reward of the world’s most precious gem and ‘digital gold’, perhaps there’s not that much difference between the two after all. That is why we decided to bring the two together in D1 Coin.
D1 coin combines the math and high level accounting of the proof-of-work process on the Ethereum network and the expertise of diamond graders to form the premiere diamond asset backed coin. With the security of the network backing the coin’s ledger, we created the most secure and divisible way to send and receive diamonds between individuals. That’s thinking with the diamond standard.
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About the D1 project:
D1 aims to be one of the top asset-backed crypto tokens accessible by everyone, backed by the valuable and rare investment-grade natural polished diamonds.
Investors from the ultra-rich to the retirement-minded can purchase and trade these coins with the peace of mind knowing that each holds the value of 1/1000th of a carat of hand selected quality polished diamonds.
