Bitcoin and Cryptocurrencies. Basic Information

What is mining?

The process of issuing Bitcoins is called “mining” – the only way to obtain cryptocurrency. It is built on the computers decision to solve complex mathematical tasks, like calculation of million hash combinations, to find the only one correct hash, which is suitable for all new transactions and a secret key, which will provide the winner with a reward approx. 12.50 BTC

How Bitcoin Mining Works

Hash, which is searched by miners,  consists of the previous block hash, the sum of transaction hashes for the last 10 minutes, and the random number which is selected by miners to make the final hash satisfy the conditions of the system. The change of these conditions  determines the complexity of finding hash, they change once in 2016 closed blocks and automatically selected to ensure that the calculation of next 2016 blocks took 2 weeks time. Your computer or any other mining hardware continuously works, consuming a significant amount of electricity to select correct hash, adding transaction records to Bitcoin’s public ledger.

Are cryptocurrencies secure?

The essence of cryptocurrency mining lies in the fact that computers, located in different parts of the World, solve mathematical tasks. The mining process is not controlled by a single issuing center, and the distribution ensures safety. Numerous miners help keep the network secure by approving transactions. All bitcoins transfers are recorded in the public transaction log. So, if one decides to rewrite transaction – the entire chain of blocks, with transaction records, linked with each other have to be rewritten as well. Today, it is practically impossible to accomplish physically. When trying to cheat, the system immediately turns to thousands of other versions of this transaction and find discrepancy in the blocks structure.

What is blockchain?

Blockchain  is the basic technology on which Bitcoin and dozens of other cryptocurrencies are based. But there are, perhaps, dozens of other ways to use blockade in isolation from cryptocurrency. But there are other ways to use Blockchain, regardless of cryptocurrencies. Abstracting from technical nuances, the principle of Blockchain work is quite simple. It can be represented as a ledger, which is owned by every participant of the event and constantly updated. In fact, you can enter any event in this book – starting from Bitcoin, Etherum financial transactions to the presidential elections results or any identification data. This book’s blocks are simultaneously stored by all users of the network, constantly updated and refer to old blocks. The basic Blockchain system is an ever-growing sequence of blocks, which are divided among participants by means of peer-to-peer networks. Each block includes a time stamp (hash sum), which can be represented as a unique fingerprint. These blocks are strictly added in a chain,  in a certain sequence (“Blockchain”). If try to rearrange the sequence of blocks, the system will reject this chain due to a mismatch between the structure and hash sum.

Bitcoin mining hardwade

Your helmet and pickax. The complexity grows as more and more efforts, hardware and new software are spent on mining. Each day more and more computing power is coming into the game. Initially, it was absolutely enough a simple home computer for mining, then the “digital miners” discovered and switched to the top game video cards (the calculations became much faster and more productive), eventually the specialized mining devices appeared in the game. First they were as just reprogrammed chips, and later ASIC – the special purpose integrated circuits, characterized by high speed of hashes calculation and relatively low power consumption. These ASICs were invented with a one single purpose – mining.

An Opening Guide to Bitcoin and the Way It Works

Bitcoin mining is a process of cryptocurrency earning. All verifications and transactions connected with bitcoins are made from one personal computer to another, which excludes any governmental oppressions or outside control. These transactions are recorded in a single blockchain, a public database of all past transactions with bitcoins, which ensures fairness and individualization of the process. Blockchain confirms transactions and verifies the status of used coins, making sure that they were not used previously.

In a word, owning a bitcoin you actually own a digital code that proves to people in a network an amount of cryptocurrency you have. Once you spend one, you notify the members of the network that you transfer your bitcoin to another owner. Your digital code works as a password that proves that a coin is yours and allows you to access it any time you need.

What is mining bitcoin and how to start?

How does bitcoin mining work? First and foremost, the entire process is based on a powerful software that solves math problems of different levels of complexity. In turn, a computer with specialized software receives bitcoins for the tasks solved successfully. People join mining groups called “pools” for more efficient coin issue. The entire process is designed as resource-consuming and complicated so the number of blockchains stays stable. Each miner founds individual blocks that contain codes to prove of work’s validity. The process is called “mining” because it is similar to scooping out other items: it requires hard work and slowly makes new coins achievable, just like gold is mined from the ground.

If you are wondering, how to start bitcoin mining, get to know with this list of basic necessary things:

  • Hardware

You should start with obtaining a powerful mining hardware. Long time ago, when bitcoin lived its first years, it was much easier to mine. A computer CPU and a relatively strong video card were enough to get coins at home. However, nowadays it is impossible. There are bitcoin earning farms in the industry that own ASIC chips with productive forces a hundred times greater than the old systems. As a result, these bases dominate the entire sphere of mining.

Thus, mining bitcoin will cost you more electricity and computer capacities than you can ever get. It is impossible to earn coins without extremely powerful hardware created for that particular aim. There are companies that do offer such systems, however they are hardly available for individual use.

There is another option: purchasing in cloud mining contracts. A lot of people use it despite the fact that this is not the safest way of mining since you don’t control the hardware itself. In addition, there is a great number of scam mining services around the web.

  • Software

After getting specialized hardware, you will also need to download specialized software. There are a lot of programs to choose from, including the most popular ones like EasyMiner, BFGminer, and CGminer.

  • Mining pool

Mining pools make earning bitcoins an easier and faster process. These are groups of people, who unite to solve blocks and get coins together. Each group member earns as many bitcoins as much effort he contributes to a chain. Without joining a pool, you might spend years trying to get at least one bitcoin with no guarantee of success.

  • Bitcoin wallet

You will also need a bitcoin wallet to get the coins you earn. These are unique addresses that belong to individual users who download special software to their computers.

In general, working in a bitcoin network makes it safe to mine. Security in these groups is established by the members: people approve transactions on their own and control the entire process without third parties. Collective mining keeps the process steady and secure.