What is Bitcoin? It is a cryptocurrency. Yes, but where does it come from? It’s not the same as with paper money, when the government decides how to print and distribute money. Bitcoin doesn’t have a central government or a paper form. So, let’s learn how Bitcoin mining works.
To get Bitcoin you should “mine”: use special software and hardware to solve complicated math problems and issue a certain number of bitcoins in exchange. This provides a smart way to issue the currency and also creates an incentive for more people to mine. Read more about mining here.
If you need Bitcoins, you can earn it by playing video games or by creating posts on platforms that pay its users in cryptocurrency. However, mining is the most proper way to earn Bitcoins.
How Bitcoin Mining Works: Special Hardware
Approximately every ten minutes mining computers collect a few hundreds of pending Bitcoin transactions (“a block”) and turn them into a mathematical puzzle. The first miner, who founds the solution, announces it to others on the network. The other miners check whether the sender of the funds has the right to spend the money and whether the solution of the puzzle is correct. If most of them grant their approval, the block is cryptographically added to the ledger and the miners move on to the next set of transactions (hence the term “blockchain”). The miner who has found a solution gets Bitcoins as a reward. As a result it gives miners an incentive to participate in the system and validate transactions.
However, the Bitcoin Network automatically changes the difficulty of the math puzzles depending on how fast they are being solved. At the beginning of mining, the PC was enough to solve almost any mathematical problem. Nevertheless, the new equipment has been discovered soon: special chips that have been reprogrammed for mining Bitcoins. These chips are much faster than ordinary computers but still need too much power. That is why mining is rather expensive and resource-consuming process. However, developers strive to invent a new generation of chips, which can solve math puzzles faster and use less power. To learn more about chips and miners read this article.
How Bitcoin Mining Works: Special Software
Once you’ve received your bitcoin mining hardware, you’ll need to download a special program that is used for Bitcoin mining. There are many programs out there that are perfect for Bitcoin mining, but the two most popular are CGminer and BFGminer which are considered to be command line programs.
The software delivers the task to the miners, then receives the completed work from them and relays that information back to the blockchain. The best Bitcoin mining software can run on almost any operating systems, such as OSX, Windows or Linux.
The whole point of mining bitcoins is to earn them. Once you earn them, you’ll need to keep them safe and secure. Coinbase or Circle can be used as a Bitcoin wallet, where you can hold your own private keys.
Problems That Concern Bitcoin Mining
As the popularity of the Bitcoin mining increases, more miners join the network, making it more difficult to solve the math puzzles. What is more, the reward for the solvation reduces. To overcome this issue, miners have developed a way to work together – in pools. Pools of miners find solutions of the mathematical problems faster than individual miners and the reward is divided proportionately to the amount of work that every miner of the pool provides.
So, as you can see the mining is a complicated process that can bring you a reward – Bitcoins. To start mining you’ll need special hardware, software and a group of like-minded people, in other words a mining pool. Although some experts say Bitcoin mining is difficult to do profitably, you can try different miners or software and as a result reach some success in this very field.