Lately, many people heard in news something about Bitcoin, however majority of them don’t really know what is Bitcoin mining about.
Let me put some light on it.
Bitcoin mining is nothing more than transactions processing via the Bitcoin network and adding them into the Blockchain.
The Blockchain consists of blocks, which are nothing more than a bunch of Bitcoin transactions. Block are produced by miners. They do it by creating a hash that consists of the transactions in the block. Hash is then added to the block. Next block of transactions will look to the previous block’s hash to verify if it is legitimate. Then miners will attempt to create a new block that contains current transactions and new hash before any other miner will do so.
It is kind of a race.
Since difficulty of Bitcoin mining is getting higher and higher almost every week, people group their calculation/hashing power and create mining pools.
By mining together they have a better chance of creating a block and having it confirmed before other miners do it. It is quite important, because for each created block whole mining pool will be rewarded with Bitcoins. Currently reward is equals 12.5 Bitcoins (plus transaction fees). However reward is constantly divided by half each 4 years. So soon it will be 6.25 Bitcoins per block.
The Blockchain is a vast, distributed public ledger of transactions.
Newly added block is always verified by nodes on the Bitcoin network. Verification process is using a Proof of Work, which covers the Bitcoin transactions in a block and is what Bitcoin ASIC Miners (mining equipment) do.
What is Proof of Work:
“In order for a block to be accepted by network participants, miners must complete a proof of work which covers all of the data in the block. The difficulty of this work is adjusted so as to limit the rate at which new blocks can be generated by the network to one every 10 minutes. Due to the very low probability of successful generation, this makes it unpredictable which worker computer in the network will be able to generate the next block.
For a block to be valid it must hash to a value less than the current target; this means that each block indicates that work has been done generating it. Each block contains the hash of the preceding block, thus each block has a chain of blocks that together contain a large amount of work. Changing a block (which can only be done by making a new block containing the same predecessor) requires regenerating all successors and redoing the work they contain. This protects the block chain from tampering.”
Who can mine Bitcoin?
Bitcoin mining process may look difficult on the technical side, however it can be done by anyone who want to become a Bitcoin miner.
Each miner secures the Bitcoin network by using Proof of Work and creating a hash for each block that is mined, so the Blockchain keeps an immutable record of all transactions taking place on the network.
Bitcoin mining is a sort of competition between all miners, because everyone wants to solve a block before anyone else will do it. Only then they will receive reward and transaction fees from the block.
Since Bitcoin mining is getting more and more popular, many people invest in huge Bitcoin mining factories, which are worth millions of dollars.
Competing individually with such huge calculating power became almost impossible. That is why, there are also more and more companies offering pool mining, which means they will buy best mining equipment, rent space, buy electricity, tune software, maintain equipment and so on. That way you don’t have to do it and you are sure your miners are working 24/7 with the best efficiency.
Companies, which I know are Rockwall Investments and BitClub Network, which is currently 7th biggest mining pool in the world.
Live mining pools ranking is here.
So, do you now know what is Bitcoin mining about?
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