Understanding Bitcoin Mining
Even if you very well understood the whole concept of what cryptocurrencies are and their purposes and have absolutely zero idea about the story behind Bitcoin mining, still that is more than enough. The concept of Bitcoin mining doesn’t even come near what an average man knows about Bitcoin and other cryptocurrencies. Of course, it doesn’t mean that it is not important or something. In fact, it is the process which assists the cryptocurrency in functioning just as intended and what continues to receive new Bitcoins every minute to digital wallets around the globe.
Now, what is Bitcoin mining, after all?
Bitcoin mining is the process by which the payments of transactions that have been taken place with Bitcoin will be added to the public ledger. It is an approach to interact with the blockchain that Bitcoin is created upon and for people who act as Bitcoin miners and take part in this computationally complex task, they will be awarded a piece of Bitcoin as a reward.
Well, I can pretty much see what kind of faces you are making after reading the above lines. Let’s break each of this into simple terms for a better understanding. Will start with..
The basics of Bitcoin (Or any other cryptocurrency) mining
Not just Bitcoin, when it comes to any cryptocurrency mining, the concept itself a little bit complicated one. However, it can be broken down into simple and small things: “Miners” are the technical people who are responsible for finding Bitcoin or any other cryptocurrency. They buy powerful computing chips that are exclusively created for the process and utilize them to run particularly designed software day and night.
This software helps the system to successfully finish complex calculations as the miners have to dig them through various layers of the digital system. Just as the saying goes, “It is easier said than done,” cryptocurrency mining is a complex process as it not only takes hefty lifting from the mining chips but also consumes a hell of a lot of electricity and a robust internet connection. If everything goes well, then the miner will be rewarded with a piece of Bitcoin.
Why is mining important?
Unlike fiat or traditional currencies, where Euros or pounds are printed and monitored by financial institutions and governments, cryptocurrencies, including Bitcoin, work very much differently. Cryptocurrencies operate on a basis of a decentralized ledger system which neither (Government nor any financial institution) control the flow. For transactions to be successfully completed and confirmed, a number of Bitcoin nodes, run by various miners across the globe have to send their side of approval to make sure that the transaction is legitimate and successful.
For doing that, the miners will be rewarded the transaction fee. Of course, this transaction fee is not all. There are still millions of Bitcoins to be dug and hence they will receiving a separate reward for that too just to incentivize the practice.
Digging through the digital layers
Now, when it says “Bitcoin mining,” it truly isn’t an act of mining such as gold mining where miners dig through the ground to get gold. All cryptocurrencies are digital and absolutely don’t need any sort of explosive excavation or panning streams. However, they certainly have their own type of prospecting and recovery and that is why the term “Mining” actually comes from.
Potential miners install and run effective mining software (Of course, there is a buttload of options available on the market) and prefer to join a pool of miners who are already doing the very same thing. Whether it is of one miner or all of them together, the software gathers all the latest Bitcoin transactions into blocks and proves their credibility by checking the “Proof of work” which covers all of the data in the blocks. And this includes the mining hardware which takes an unlimited number of probabilities at a specific number again and again until he or she finds the right one.
Honestly, Bitcoin mining is a computationally complex procedure which later becomes more difficult when more and more miners try to build a block in the chain. And in fact, this is the reason why miners intend to join a pool and utilize the only and effective software, Application Specific Integrated Circuit (ASIC) for mining purposes.
Each and every individual cryptocurrency miner or even a pool of miners are the first to build the proof of work for every block they are awarded a particular fee for those successful and a piece of Bitcoin. That piece of Bitcoin is created with a whole new Bitcoin that are produced via the process of Bitcoin mining. This process will continue until the miners dig complete 21 million Bitcoins.
As the number of Bitcoins available decrease, the transaction fee to the miners will slowly move toward to a better number. Currently, looking at the rate with which Bitcoin mining is becoming complex, mining software and tools are progressing, and the reward will be decreasing.
Anyone can become a Bitcoin miner provided they got the best and high-level computational power in order to dig effectively and can take the high-level electricity consumption. Nevertheless, Bitcoin mining has become widely specialized over the last decade and is usually done by extremely specialized professionals that have special software, supercomputers, and a lot of electricity.
In order to mine effectively, as a miner, you ought to know what you are doing and you should be willing to only invest a lot of your time and money but also your interest. Indeed you got all this, then you surely can give it a try and become a Bitcoin miner.