What is Bitcoin Mining?

Bitcoin was created as a decentralized alternative to the banking system. This means that the system can operate and transfer funds from one account to another without any central authority. Bitcoin mining is the official term for computing processes required for encrypting batches (or blocks) of transactions. It is basically solving complex mathematical algorithms, where the miner receives Bitcoin as a reward. The first block ever encrypted is called as the “Genesis Block”. The “Genesis Block” was mined a decade ago today by the Bitcoin’s elusive creator Satoshi Nakamoto, something that marks the very start of the Bitcoin Blockchain. Ten years later, there are now more than half a million blocks on the Bitcoin Blockchain and the price of one Bitcoin has increased from almost zero to $3,900.

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How to become a Bitcoin Miner?

The average user most probably will not start mining cryptos and will buy his bitcoins through an online card payment or a simple bank transfer, although anyone who wants to can participate in updating the ledger of Bitcoin transactions. All is needed to be done is to guess a random number that can solve an equation generated by the system. This guessing can be occurred by the computer. The more powerful the computer is, the more guesses can be achieved per second. If you manage to guess correctly, you get Bitcoins as a reward and you are able to write the “next page” of Bitcoin transactions on the Blockchain. This is exactly why people mine cryptocurrencies, because they can earn additional ones by doing so. Also Bitcoin miners help keep the Bitcoin network secure by approving transactions. Mining is an important and integral part of Bitcoin that ensures fairness while keeping the Bitcoin network stable, safe and secure.

Breakdown of the Mining Process:

Once the mining computer find the right guess, your mining program decides which of the currently pending transactions will be grouped together into the next block of transactions. Assembling this block represents your moment of glory as you have now become the temporary banker of Bitcoin, who has the right to update the Bitcoin transaction ledger, known as the Blockchain. This provides a smart way to issue the currency and also creates an incentive for more people to mine. The block that you have designed, along with the solution, is sent to the entire network, in order for other computers to validate it. Each computer that validates the solution, updates its copy of the Bitcoin transaction ledger with the transactions that you have chosen to include in the next block. Since mining is depending on a form of guessing; for each block, a different miner will guess the number and get to update the blockchain. After this stage is accomplished, the system generates a fixed amount of Bitcoins that are rewarded to you, as a compensation for the effort you put in solving the math problem. Additionally, you get paid any transaction fees that were attached to the transactions you included into the block. So generally, Bitcoin Mining is the process of approving transactions on the Blockchain. However the name is a bit ambiguous and can lead to different interpretations. The main aim of mining is to maintain the ledger in a decentralized manner. Now that you have a better understanding of what Bitcoin Mining is, you might be thinking that it is a relatively easy way to make free money, although things are a bit complex; Satoshi Nakamoro, who introduced the rules for mining in a way that the more mining power the network has, the harder it is to guess the answer to the mining math problem. So the difficulty of the mining process is actually self-adjusting to the accumulated mining power the network possesses. If more miners join, it will get harder to solve the problem; If many of them step out, it will get easier. This is known as the mining difficulty.

Why did Satoshi do this?

Satoshi wanted to create a steady flow of new Bitcoins to the system. This was done in a way, to keep inflation in check.

An Interesting Fact about Bitcoin Mining

An interesting fact is that according to a report of the International Energy Agency, that was conducted in the end of 2017, Bitcoin mining has been using as much electricity as smaller countries like Serbia , and blockchain specialists forecast the power consumption level of the US to be needed for maintaining the system by 2019. Therefore electricity prices have a direct correlation with bitcoin mining, because people will only stay motivated in allocating their computation resources for processing, if the income they can generate is higher, than the electricity costs they need to pay

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