Continued From Blockchain and Bitcoins 101 – Part 1
Bitcoins are ‘mined’
Now this is tricky to understand. Bitcoins are not created but existing ones are mined or discovered. Mining is adding bitcoin transactions to the public ledger. Once added it is broadcasted to all peers in the network. People around the world compete to mine bitcoins.
The more the number of miners, the more complex the mining will be. A math problem must be solved to achieve the bitcoin. To solve the complex math problem, miners can form a group and then mine bitcoins. This way they have more chances of getting bitcoins and they divide the bitcoins amongst themselves.
Compete because bitcoin mining is resource intensive and time-consuming. Whoever mines quicker gets the reward. Hence pooling is also done. If individuals work towards it, it may so happen that someone loses by a fraction of a second. Then he must start over again. For something, like mining, that requires fast and quicker work, there must be strong hardware support. Bitcoin mining is resource intensive and is so for security reasons.
Bitcoin mining hardware
When bitcoins were new, CPU’s were used for bitcoin mining. Solving math problem required faster and effective processors and hence GPU came into the picture. GPU consumed less power and offered faster bitcoin mining.
Bitcoin hardware requirements (Read only the system requirement part) – https://bitcoin.org/en/bitcoin-core/features/requirements
Mining hardware comparison – https://en.bitcoin.it/wiki/Mining_hardware_comparison
Hash rate – the Hash rate is the measurement of how many math calculations are done by each computer on the network on a per second basis. Greater the hash rate of a computer, higher the chances of finding a bitcoin block and winning bitcoins as rewards. A new block of bitcoin transactions is added to blockchain every 10 minutes (for mining).
Hashcash Proof of work – It is an algorithm that requires a selectable amount of work for bitcoin computations, it acts like a proof of the work done by the miners and is verifiable. After which, the miner gets rewarded.
Bitcoin miners using whether the CPU or GPU are all making efforts creating hashcash proofs-of-work in the bitcoin network.
The mining takes place in a block chain fashion.
Read more about hash cash here – https://en.wikipedia.org/wiki/Hashcash#Bitcoin_mining
Is the effort involved in bitcoin mining worth it? Most of the miners lose bitcoins by a fraction of a second. The hardware power required must be tremendous and the computation must be quick.
Exchange Rates (subject to change)
1 Bitcoin equals 47870.70 Indian Rupee.
1 Bitcoin equals 718.24 US Dollar.
Latest exchange rates can be checked here- https://btcxindia.com/
So, it seems bitcoin mining is worth the efforts after all.
continue to part 3 – Blockchain and Bitcoins 101 – part 3