The Bitcoin Mining Process
When you think of Bitcoin mining, what comes to mind? Perhaps, a set of tiny robots digging into a fantastical digital ground with an overflow of coins. Well, this is not far from the truth. In this article, we’ll be touching on various aspects of Bitcoin mining. From learning about the true meaning of Bitcoin mining to its process, we have you covered.
What is Bitcoin Mining?
Bitcoin mining is the process by which new Bitcoins are put into circulation by recruiting high-powered computers into solving complex computational puzzles. The name ‘Bitcoin mining’ was given to this process because it is very similar to the process of mining for minerals. For better understanding, we will be using this analogy. When mining for gold, for example, the ground is dug for long periods with hopes of finding pure gold. Conversely, when mining for Bitcoin, a bunch of computers works for a considerable time to solve a complex computational puzzle. This will then lead to the creation of Bitcoin. Mining takes a lot of electrical power. It takes 72,000 terawatts to mine one Bitcoin. As improbable as it might sound, new Bitcoins are created when computers solve highly complex mathematical problems that cannot be solved manually. Solving these complex problems ensures Blockchain ledger and network security. Bitcoin is built on a ledger called Blockchain. As the name implies, Blockchain consists of a chain of blocks. Unlike banking systems where transactions are documented and recorded by banks, in Bitcoin, miners put together all transactions in a block which is then added to Blockchain. Each block contains a series of transactions. For a new block to be validated, it must contain the solution to the puzzle of the previous block. When this is done, the block is added to a chain of other blocks.
Process of Bitcoin Mining
When Bitcoin mining came into existence in 2009, the process was carried out by computer geeks as a hobby. This also earned them some money. At the time, Bitcoin was not as known as it is now so miners were not as much. Now people question if mining is still profitable because of the increase in the number of miners. The pseudonymous inventor of Bitcoin, Satoshi wanted the number of Bitcoins mined to remain constant no matter how many miners came aboard. Also, the reward rate for mining is reduced by half every four years. This has posed great difficulty to miners in this current age. Regardless of this, there are still miners that actively gain from this process. Mining is a very competitive space. It involves different miners competing to be the first to solve a complex puzzle known as the ‘hash puzzle’. Mining involves a concept known as ‘proof-of-work. Proof-of-work confirms transactions and produces new blocks to be added to Blockchain. After a miner has successfully solved the puzzle, they get rewarded with new Bitcoin. When verifying transactions, miners also get a small fee from this process. As technical as it sounds, Bitcoin mining can be done by a computer novice. Anyone can mine Bitcoin including you. To mine Bitcoin, an ASIC should be set up. The following are steps to follow in setting up an ASIC. • Buy an Application Specific Integrated Circuit device (ASIC). They are very powerful computers designed for mining specifically Bitcoins. It has very high efficiency compared to other means of mining like CPUs, GPUs, and so on. Although they can mine other coins as well, they do so at a slower rate in comparison to ASIC. • Ensure that ASIC is connected to the internet. It must be configured through a web browser. • Account must be set up with a mining pool before proceeding. Mining pools consist of a group of miners coming together to deal with the task of Bitcoin mining. Mining pools are known to be very effective. After mining, members split their rewards according to the amount of work they have contributed to the probability of finding a block.
• From ASIC’s web panel, input the pool’s account information.
• Miners can now start generating Bitcoin.
Having successfully set up your ASIC, mining can now begin. The following are processes involved in mining:
Mining nodes collect and combine new transaction data. These nodes maintain records of blocks to be verified. Miners must verify 1MB worth of transactions to be eligible to earn Bitcoin.
To solve a problem, miners must complete proof-of-work. This step confirms transactions made.
Miners have to come up with a 64-digit number called a hash. What happens is that they need to guess the possible 64-digit number.
Different miners tussle to be the first to guess these numbers so that a block is completed.
The time required to mine one Bitcoin is about 10 minutes. Suppose more power is dissipated into mining and time taken is reduced, the difficulty it takes to mine will increase bringing the time taken back to 10 minutes.
Duties of Bitcoin Miners
Miners have played a very important role in Bitcoin. This is not to say that without miners Bitcoin cannot operate. Bitcoins would still exist without miners but additional coins will cease to be produced. Apart from this, miners help a great deal in coin circulation and fraud prevention. The following are duties of miners: • As explained, miners generate Bitcoins by using computers to solve complex mathematical problems. • Bitcoin Network Security: Miners make it difficult to attack the Bitcoin network. They check fraud and threats to the network. • Miners verify transactions and put them in blocks. This process checks double-spending and total transfer volume. Note that the total transfer volume is within the range of 0-21 million Bitcoins. Bitcoin mining has been a very profitable and essential tool in the generation of Bitcoin. With this article, you must have understood the workings of mining. While mining, ensure to join a mining pool and set up ASICs device for great results. Also, follow other instructions given to maintain a smooth process.