Last week a friend of mine asked mij to explain Bitcoin mining to him ter a way that a five-year-old would understand. That is when I realized that there would be so many out who don’t yet understand the concept of Bitcoin mining.
For starters, Bitcoin mining is an energy-intensive process of introducing fresh Bitcoins into the ecosystem.
You can think of it for a ogenblik spil fresh currencies creation by different governments around the world. But unlike the governments, Bitcoin’s supply is immobile and regulated by the laws of mathematics that are practically unlikely to pauze. Also, it is not spil ordinary spil banks printing fresh currency notes. Instead, a loterijlot of work, energy intensive, and cost acquiring is carried out before producing a single Bitcoin, which is called proof of work.
Also, considering the fact that Bitcoin is based on the blockchain technology, I’d recommend you to meticulously understand the concept of blockchain. Because if the term blockchain is alien to you, this guide might not be of good help to you.
What Is Bitcoin Mining?
Before diving into how Bitcoin mining works, I recommend you to witness this brief movie on Bitcoin mining to get an overall picture of what mining is.
Spil stated te the movie, unlike printing of the fiat currency by central banks, bitcoins are mined on the Bitcoin network. Think of it like gold mining but on the internet.
And just like gold mining is cost and energy intensive, Bitcoin mining too is intensive because it is zonderling and limited by the vormgeving of its own protocol.
Also, just like gold miners, Bitcoins are mined by Bitcoin miners and this mining process introduces fresh Bitcoins te the ecosystem.
Introduction of fresh Bitcoins happens when Bitcoin miners mine a valid Bitcoin block successfully thereby earning the block prize te fresh Bitcoins. This process is sometimes also referred to lottery because this process of winning fresh coins happens based on guesses which the miners make.
However, thesis are not plain, random guesses. Instead, they are very educated and constrained guesses which requires a lotsbestemming of energy.
For each guess to be even tested, a certain amount of energy needs to spent, ter which usually most guesses fail, wasting a lotsbestemming of energy from the miner’s pocket.
Irrespective of that, every Ten minutes a miner te the world succeeds te guessing it right after a loterijlot of energy spending and is thus permitted to add the block onto the blockchain and receives the lottery amount which is the block prize.
Which means, the miner who wasgoed able to guess a valid block vereiste have made innumerable attempts before reaching the juist guess, te turn searing a loterijlot of energy. This is Proof of Work and spil a prize for searing their energy, miners get the block prize te the form of Bitcoins which they can zometeen sell or HODL at the current market price.
Spil of now, the prize for finding a valid block on Bitcoin’s network is 12.Five freshly created Bitcoins. Back ter 2009, at the embark of Bitcoin network, the block prize wasgoed 50 BTC. This prize halves every Four years to maintain inflation and reach the total supply of 21 million sometime te 2120.
This wasgoed a non-technical way of understanding what Bitcoin mining is and how it works on a higher level.
Let us now look at a more technical explanation of Bitcoin mining.
What Is Bitcoin Mining? [Explained Technically]
Before diving into Bitcoin mining I would like to explain a few terms to help you relate to what I am talking about.
Bitcoin uses the SHA-256, a mathematical function that takes an input of any size and produces a motionless length output every time. The generated output is referred to spil hash or Bitcoin Hash.
Merkel tree is a tree of hashes and the last hash of that tree is called the Merkel root or root hash. This is a concept te rekentuig science and cryptography based on which Bitcoin is mined. The bitcoin block tree looks something like this after being hashed te a tree:
Note: I have only taken Four transactions ter this example but te reality, there are several hundred transactions te a Bitcoin block.
Target and difficulty of the Bitcoin network are similar things but difficulty is more understandable te human nature. Target is a 256-bit number (utterly large), obtained by hashing the previous block’s header ter a certain way, that all Bitcoin clients share, while difficulty is a measure of how difficult it is to find a hash below or equal to a given target and is measured te hash rate.
‘Bitcoin nonce’ is a particular 32-bit (4-byte) field ter the input of SHA-256 hash function whose value needs to set ter a way that the hashed output contains a certain number of leading zeros which should be equal to or less than the target. And this is the field with which miners play to get the required output.
Don’t get shocked te case you toevluchthaven’t meticulously understood the terms mentioned above. I will connect all the dots to voorstelling you a fatter picture that will clarify things.
But for connecting the dots, I need to refer to my explanation of Bitcoin mining ter the previous section. If you reminisce, wij discussed how the miners win the lottery by guessing the keurig gegevens that is unlikely to find without spending energy.
Let us see how a miner wins this lottery.
To successfully mine a block, a miner needs to hash the block&rsquo,s header te a way that it is less than or equal to the &ldquo,target.&rdquo,. This block header is created by hashing all the transactions te a block, thereby forming a Merkel tree with a Merkel root.
Further, this root is combined with a hash of the latest block and a nonce. Now this raw gegevens of Merkel Root + Previous Hash + Nonce+ Timestamp is waterput into an SHA-256 function to produce a certain type of hash output which is spil vanaf the target.
The target, at the time of writing this article, is that the SHA-256 hash of a block&rsquo,s header voorwaarde be a 256-bit alphanumeric string, and vereiste commence with 17 zeros. You can also see here that at some point ter history the target wasgoed to obtain a block hash with 8 zeros. The target switches te tandem with the switch ter difficulty every 2018 blocks.
The miners then arrive at this particular hash (or target) by varying a petite portion of the block&rsquo,s headers, which is called a &ldquo,nonce.&rdquo, A nonce always starts with &ldquo,0&rdquo, and is incremented every time for obtaining the required hash (or target).
Since the varying of the nonce is kasstuk and miss, the chances of getting this particular hash (or target), which starts with thesis many zeros, is very low. Therefore, many attempts vereiste be made by a miner by varying the nonce and continuous varying of the nonce te an incremental way is called mathematically guessing the proof.
And this requires an enormous amount of computational power and hardware resources which proves that a large amount of work is carried out before mining any individual block. That&rsquo,s why this is called &ldquo,proof-of-work&ldquo,.
And te this way, whichever miner obtains the juist Bitcoin Hash spil vanaf the target very first gets the lottery and gets the block prize of 12.Five BTC.
And this way the block and the transactions present te that block gets added and updated on the universal ledger of Bitcoin called spil Bitcoin’s blockchain.
To conclude this, I will vertoning you two simplistic graphics of Bitcoin mining that will further add to your understanding. I have borrowed this from the internet.
Difficulty level determines the commence of target hash, which keeps switching every 2018 blocks, toughly every two weeks.
All said and done, it might look like a fantastic idea to get you began with Bitcoin mining and earn because the network is open for anyone to join. However, Bitcoin mining has evolved a lotsbestemming ter last nine years.
Originally, when there were no Bitcoin exchanges, the only way to get them wasgoed to set up a total knot and begin mining on your CPU until you find a valid block. That, however, is not possible anymore.
Bitcoin mining keeps on getting difficult spil more miners join ter to maintain the balanced generation of fresh coins. And overheen the years many miners with special GPUs and ASIC miners have joined the Bitcoin network, thereby raising the difficulty tapkast so high that it is no longer profitable or even possible to mine on CPUs.
Now, mining has become a niche task that requires you make hefty investments te special hardwares, a lotsbestemming of electric current and other cooling devices. Therefore, it is now done ter gegevens centers and big mining farms.
Unless you are ready to become a miner, keep working hard ter your current profession, HODL Bitcoins and stay tuned to CoinSutra.
That is all from my side ter this article. I will leave you with a movie through which you can take a sneak peek into a Bitcoin mining farm and understand it better.
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