What is bitcoin mining and how does it work?
In 2017, the increase of the bitcoin price reached 900%. Despite the subsequent slight decreases, it is bitcoin that still remains the most popular cryptocurrency. So, what is bitcoin and how is it mined?
What is Bitcoin
When hearing the term ‘bitcoin’, one usually means cryptocurrency in general, since it was bitcoin that started the cryptocurrency development. Bitcoin as we know it, as well as its system of functioning and encryption, was created by Satoshi Nakamoto (or a group of people who used this name). Why should one invent other virtual currencies? Bitcoin and other types of cryptocurrencies have a number of features that differ this very type of money from other electronic monetary units (webmoney and others).
Features bitcoin are as follows:
• It doesn’t have a physical appearance.
• The cost is determined by demand.
• Emission (maximum – 21 million coins).
• Decentralization and system security.
• Possibility to mine cryptocurrency independently.
What is bitcoin mining and who to deal with it? So, cryptocurrency mining means the use of the technical power of the computer and components (in particular, video cards) to receive a reward. The machine records the transactions made in the system, for which the miner receives a reward.
How to mine bitcoin
Volumes and capacities of bitcoin mining in the modern world are growing. Once, only a PC was needed to mine cryptocurrency, but today, people wishing to figure out how to mine bitcoins and start doing it, should have high-power computing.
The nature of cryptocurrency mining is as follows: computers or entire computer networks (mining farms) located around the world, solve certain tasks, the result of which is the creation of cryptocurrency. Many users compare the principle of mining with the distribution of files on the torrent tracker. A lot of users take part in the transaction confirmation (and verification of previous actions on the network), providing operation of the whole system, receiving in their turn a reward – cryptocurrency.
In order to get profit, it is necessary to comply with two conditions: verification of transactions on 1 MB and to be the first among miners to find a confirmatory hash using the computing power. The speed of its detection depends directly on the power of the equipment.
So, what is needed to mine bitcoins properly? First, technical capabilities. It is either video cards or special ASIC devices (only for bitcoin mining). The latter are quite expensive – their price can reach several thousand dollars. It is also necessary to take into account the cost of electricity in the region where mining will be conducted. There is a special rating of the countries, where it is most profitable to mine cryptocurrency (according to the International Business Times study).
Those who have such an opportunity, unite all their technical capacities in farms for bitcoin mining – it can be one computer with several graphics cards, or a dozen. But the hardware and the cost of electricity for its stable operation can be quite expensive, so that large farms are affordable not for everyone. Therefore, to increase the chances of getting cryptocurrency, many users get together in so-called pools. All the produced coins of such farms are divided among the participants, depending on their technical contribution to the computing process.
Another possible option is cloud mining, when it is not necessary to acquire hardware: the user leases computing power from special remote centers. This is suitable, in particular, for those who live in regions with a very high cost of electricity. This option will also save from the extra headache those who don’t want to deal with the technical nuances of bitcoin mining.
As when buying equipment for your own mining farm, it is worthwhile to calculate the profitability before cloud mining of cryptocurrency as well. You can start cloud mining free of charge using the so-called ‘cranes’ – services for mining cryptocurrency with free access. However, it is unreal to earn money in this way.
Currently, bitcoin mining is one of the most promising types of investments, if choosing an optimal region and calculating possible financial risks.