Last Updated on May 12, 2022 by Larious
Bitcoin mining is the process of generating new bitcoin by solving cryptographic puzzles. Mining the bitcoin website is an energy-consuming process that is done by computing systems comprised of strong hardware to solve mathematical puzzles.
The Bitcoin Blockchain is extended by mining blocks. The mathematical puzzles work as a Proof of Work or PoW, a reference of the computational work from the last miner to the new miner. Bitcoin mining is a reward-gaining process. Every time a miner solves a puzzle he/she verifies or adds a block to the Blockchain of the bitcoin network. For that, he/she gets rewarded with new bitcoins.
At the very beginning of the bitcoin era, the mining used to be done on computers by normal central processing units (CPUs). So, the process was slow. But mining bitcoin requires lots of energy and a strong hardware system. Now, mining is done by large hardware pools that make the process less time-consuming. However, mining on large scale affects the environment and can cause to whether change. As a result, many mining pools have been closed in China.
Bitcoin Mining- Here Is All You Need To Know
Bitcoin mining is done by verifying blocks. Bitcoin transactional data are stored in blocks of Blockchain. The amount of data is different in every block depending on how many transactions are stored. The miner downloads a block on his computer.
This is where the transactions get carried out further.
The mining process in bitcoin has some benefits to the whole bitcoin transaction system.
- The process of verification of transactional data by a computational system makes the bitcoin system trustworthy.
- Verifying transactions prevents bitcoins from double-spending which is the main problem with physical cash.
Mathematical Calculation In Bitcoin Mining- Points To Note
Bitcoin mining is done by mining a part of a block that is called the block header. The block header has six things in it that are needed to mine the block.
- Version: That is the software version of mining software.
- Timestamp: This is the time of the creation of that block.
- Previous block hash: It contains all the information of the previous block and a hash number after that.
- Markle root: In the block, all the transactions are hashed together and the whole thing is called Markle root.
- Difficulty target: This is the main part of mining. It set the computational difficulty level that the miner has to solve. It is a 64-digit cryptographic hexadecimal number that has a bunch of zeros, in the beginning, having the same string length as the largest hash number of the PoW algorithm which is SHA256.
The miner put all his effort to come up with a 64-digit hash number that is equal to or very closely smaller than that Difficulty target number. Now, the process is not that simple. It has some more complexity. At a point in time, many miners around the world are trying to get the closest number. You can say, they are actually competing with each other. The one who will come first with the closest number will be considered the winner and get rewarded. So, two criteria have to be fulfilled together.
- The 64-digit hash number should be equal to or very closely smaller than the difficulty target hash number.
- The result that comes first will be the actual result.
6. Nonce: This is also a hexadecimal number. If a miner fails to get a smaller number, they get one more chance in the nonce to perform another hash puzzle. And, every time he can’t get the number he keeps getting chances to solve another puzzle.
Mining bitcoin is a profitable action because you get incentivized. But it takes all the effort and expenditure to buy strong hardware and set those up. You have to have the expertise too. However, another way to be profitable by bitcoin is by trading bitcoin.
Just like the commodity gold, bitcoin has its high trading value and this is much easier and effortless than mining. You can find so many bitcoin exchange platforms that are out in the market. One reliable platform is the Bitcoin Era. However, do some research on bitcoin trading and the volatile market of bitcoin before starting it.