What is Bitcoin Mining? Part 1
Crypto mining is intensive and pricey, and you receive rewards only from time to time. However, this process is attractive to lots of investors who are concerned about crypto. The reason is simple: they are rewarded with crypto tokens for their hard work. Do you remember the Monuments Men? That’s how people see mining, especially those who know how the technology works.
Nevertheless, you need to understand first whether mining is really for you. We advise you to check out our article and then make a decision about whether or not you’d like to invest in mining.
We will talk mostly about Bitcoin, both the concept and tokens. The main attraction for most Bitcoin miners is the possibility of receiving precious Bitcoin tokens.
There are some ways to get Bitcoin without being a miner. You can buy Bitcoin and other cryptos with fiat currency, as well as trade it using any cryptocurrency (e.g., LTC, Gram) on any exchange, such as BitForex,. You can also receive Bitcoin tokens through video games or freelance work. Nowadays, there are some platforms where freelancers can work and get paid with Bitcoin tokens and other cryptocurrencies. Some of the most popular ones are Coinality, Crypto Jobs, and CryptoGrind.
The BTC reward is always a stimulus for miners. It makes them support the primary purpose of mining: to help support and monitor the Bitcoin network by using their home computers. Many users are involved in the network all over the world, so Bitcoin is considered a “decentralized” cryptocurrency. It doesn’t depend on banks, governments, or any other regulations.
Main Outcomes
● By mining, you can receive cryptocurrency without any external funding.
● To earn a reward, you need to complete “blocks” of verified transactions that are added to the blockchain.
● A reward is given to the first miner to solve each block’s proof-of-work problem; the probability of finding the solution is connected to the portion of the overall mining power on the network.
● Double-spending is the problem of spending digital currency twice.
● To set up a mining rig, you must have either a GPU (graphics processing unit) or an application-specific integrated circuit (ASIC)
Miners can earn tokens by being auditors. All they need to do is to verify Bitcoin transactions. This role was invented by Satoshi Nakamoto, the person who created Bitcoin. It helps keep users honest and avoid the double-spending problem.”
Double-spending is when a Bitcoin owner spends the same cryptocurrency twice. It is impossible with fiat currency. For example, when you go shopping and spend $10 on snacks, you don’t possess that money anymore, so it’s impossible to spend the same $10 bill on a pack of cigarettes. But with cryptocurrency, as the Investopedia dictionary explains, “there is a risk that the holder could make a copy of the digital token and send it to a merchant or another party while retaining the original.”
How does it work? Let’s say that you want to spend two $10 bills, one of which is fake. By checking the bills’ serial numbers, a person would notice that both bills have an identical number. Therefore, one of the banknotes is counterfeit. A Bitcoin miner can do the same thing by checking transactions to make sure other users are not using the same Bitcoin twice. Below are some more examples.
After validating a block (1 MB worth of Bitcoin transactions), a miner is rewarded with Bitcoin. The 1 MB limit was set by Satoshi Nakamoto, but some miners think that it would be better to expand the block size so that the Bitcoin network can handle and validate transactions faster.
It’s worth mentioning that validating 1 MB worth of transactions doesn’t mean you’ll receive some Bitcoin. Rather, you just become eligible to receive them. 1 MB of transactions can theoretically be as small as one transaction (though this is not common at all) or as large as several thousand. It depends on how much data the transaction takes up. Sometimes, one transaction is the same size as 1 MB of transactions.
“So, after my hard work of validating, I might not earn anything?”
Yes, that’s right. If you want to earn some Bitcoin, there are two requirements, one of which is a matter of effort, and one that is a matter of luck:
1) You have to validate~1 MB worth of transactions.
2) You have to be the person to find the right answer to a numerical issue.
This process is also known as proof-of-work.
“What does that mean?”
You’ve probably heard that miners need to solve hard mathematical equations, but that’s not really the case. To find the right answer to a problem, you don’t have to use difficult math calculations. What you actually need is to be the first to come up with a 64-bit hex number (a “hash”).
A target hash is a number that a hashed block header must be less than or equal to for a new block to be awarded. In general, it’s guesswork.
Despite this fact, it’s still really hard work. If we calculate all potential guesses for each block, we will receive billions. That’s why miners possess very powerful equipment.
To mine effectively, you need to have a high hash rate. Hash rates are measured in megahashes per second (MH/s), gigahashes per second (GH/s), terahashes per second (TH/s), and most recently, exahashes per second (EH/s).
Mining has one critical purpose: to circulate new coins. Mining is the only way to implement them. Thus, we can say that the miners are “minting” currency. Let’s imagine that miners disappeared, The Bitcoin network would still exist, but new bitcoins wouldn’t be generated.
Bitcoin mining does have a definite end. Per the Bitcoin Protocol, the total number of bitcoins will be capped at 21 million. However, there are rational predictions that say the last bitcoin won’t be mined until around the year 2140, so we definitely have lots of time.
We would like to mention that if you become a successful miner, you are granted new privileges, such as the ability to vote on proposed modifications to the Bitcoin network protocol.
Another interesting point we are sure you are interested in is how much you can earn. The reward for Bitcoin mining is halved every four years or so. In 2009, when Bitcoin first launched, the reward for miners was capped at 50 bitcoins per block. In 2012, this amount was halved to 25 BTC, and by 2016, the reward was halved again to the current level of 12.5 BTC. Around May 2020, the reward will halve again to 6.25 BTC. As of March 2020, the price of Bitcoin is about $9,000 per token, so after completing one block, you can earn about $112,500. It’s definitely a good reward for completing the hash problem.
Check the Bitcoin Clock so that you don’t miss the next halving. There you can find information that is updated in real-time. One interesting fact is that Bitcoin’s market price is closely related to its marginal cost of production.
Another platform that may be useful and interesting to you is Blockchain.info. There you can see how many blocks have been mined in real-time, as well.
The second part is coming soon! Stay tuned to https://debay.io/
