Bitcoin Mining Explained | Everything You Need To Know About Bitcoin Mining

If you’ve recently bought a graphics card, you’re probably aware of the global shortage, or you’ve heard about bitcoin mining in the media. Some sources reproach minors for buying everything. But who are these minors?

Minors is the term used for people who collect cryptocurrency. Miners of currency mint their cryptographic currency in their farms, computers specially trapped who are dedicated to this task. You’ve probably heard about the most famous cryptocurrency, Bitcoin, although it’s not the only one.

But why does crypto-currency make one, why this sudden agitation? And if someone else mines money, should you do it too? Let’s take a closer look at the current trend.

Chain of Blocks

First, let’s review the fundamental principles of Bitcoin and the blockchain. You can read more about one of our articles, my explanation today will be brief.

Bitcoin is a decentralized virtual currency. It means that it has no central authority, and no one trusts anyone. Payments are however secure. The blockchain contributes to their security.

The blockchain can however be considered as a newspaper on the Internet. The chain of blocks is a chain of successive blocks holding transactions recorded as the identity of the one who transferred the bitcoins, the quantity, and for whom.

The blockchain can also be called a big book, which is true. It also has some features that are worth mentioning here.

The main feature of the blockchain is that all actual Bitcoin network participants store the entire blockchain with all the transactions that had never been done before, and participants continually add new blocks at the end of the block chain. chain.

The second key aspect is that the blockchain is based on cryptocurrency (hence the word “crypto” in “cryptocurrency”). The laws of mathematics, not the reputation of a person or organization, dictate the functioning of the system and ensure that everything works as intended.

Those who add new blocks are called minors. For each new block obtained, its creator is currently receiving a reward of 12.5 bitcoins. This equates to approximately $ 30,000 based on the July 1, 2017 exchange rate.

Finally, all new bitcoins are hit by the bitcoin mining process, and this is the only way to create new bitcoins.

Each new block is created every 10 minutes. There are two reasons for this.

First, it provides a constant for synchronization. Ten minutes are dedicated to distributing a block across the web. If users could constantly create blocks, then the Internet would be filled with different versions and it would be difficult to sort which would be added at the end of the blockchain.

Secondly, the 10 minutes are needed to make the new block more “beautiful”, which from a mathematical point of view is. There is only one correct and “nice” block that can be added at the end of the block chain log.

Why Blocks Should Look “Pretty”

For a block to be “correct”, everything must be valid and follow the laws of the blockchain. The most important law is that someone who sends money must have that amount of money.

A “nice” block is one that digests as many zeros as possible at the beginning. For more information about defining a digest (or hash, which is the result of some mathematical transformation of a block), please refer to this article again.

This is not, however, of utmost importance at the moment. To get a “nice” block, the block must be “shaken”. The “jolt” means that the block is changed insignificantly and then controlled to become “beautiful”.

Each miner constantly “shakes” candidate blocks in the hope that he or she is lucky and shakes a “beautiful” block, which will be the one included at the end of the block chain, with a nice reward of $ 30,000 to the key.

If the number of minors multiplies by ten, then a block must also become 10 times “more beautiful” to be worth to be added to the chain of blocks. This method maintains the speed of a new block discovery: regardless of the number of miners, one block will appear only every 10 minutes.

And that’s why the block must be “pretty”. The standard prevents anyone from rewriting the full transaction history. In general, if each block requires 10 minutes of combined effort by all miners, there is simply no way for a person to design a “beautiful” forged block and falsify their transaction history working alone.

Minors

In 2009, when only Bitcoin enthusiasts and developers were stuck on the subject, the bitcoin mining was simple, and a bitcoin was worth about five cents. Imagine that there were only a hundred minors. Therefore, Egbert, an imaginary miner, could “shake” a block and get a reward at least once a day.

In 2013, when the exchange rate of bitcoins reached $ 100 per bitcoin, so many miners had joined the pack that a stroke of luck could take months to hit. Miners had begun to merge into groups, cartels that “shake” the same candidate block together and then share the reward among the participants.

Subsequently, new hardware appeared: ASIC (application-specific integrated circuit). ASICs are microchips developed for a specific task, in this case, to shake Bitcoin blocks as efficiently as possible.

The power of ASIC mining is significantly higher than that of a general purpose computer. Huge ASIC-based farms began to appear in China, Iceland, Singapore and other countries, targeting places that were cold (such as underground), and, better yet, close to a hydroelectric plant for lower electrical costs.

The mincing of bitcoins at home quickly became useless. 

Mining Altcoin: why graphics cards are gone

Bitcoin is the first cryptocurrency and the most popular. Nowadays, however, we have about 100 alternative cryptocurrencies, also known as altcoins.

The creators of altcoins do not want the cost of entry to bitcoin mining to be too high or difficult to access, so they must design new criteria for the required beauty of the blocks. Creators want the criteria to prevent the creation of dedicated hardware (ASIC) or delay it for as long as possible.

They are doing what they can to keep the game open to regular computer users in order to make a tangible contribution to the total power of the network – and reap the rewards.

In addition, a common graphics card is used to “shake” altcoins. It turns out that graphics cards work well for such calculations. Therefore, the availability of a bitcoin mining process can increase the popularity of a particular altcoin.

Please note the location of Ethereum on the second line of the table above. This relatively new cryptocurrency (launched in 2015) has unique features, especially its ability to incorporate not only processed payment information into the blockchain, but also interactive objects, or smart contacts, that operate. according to programmable rules.

We will have to address in another article why all this generated a considerable enthusiasm of the public. For now, we can only say that Ethereum’s new properties have attracted a lot of interest from cryptographic investors and have led to rapid growth: Aether started 2017 at $ 8 and reached $ 200 on June 1st.

Ethereum mining, in particular, has become exceptionally profitable, which is why miners have bought graphics cards.

If the miners stopped the bitcoin mining

What if bitcoin mining stopped paying – that is, if the income did not cover equipment and electricity costs and miners stopped mining or another mining currency started?

What would happen? Is it true that if the miners stopped bitcoin mining, bitcoins would stop working or become too slow?

Well no. As we already explained, a chain of blocks constantly adapts its criteria for the “beauty” of the block in order to maintain its creation rate.

If there are 90% fewer miners, it will be necessary to calculate 90% less for a new block to be approved. The block chain itself will remain fully functional.

The absolute value of the reward for new blocks decreases over time. This change is also programmed in Bitcoin laws. During the first four years (2009-2012), the reward was 50 bitcoins. Currently, it is 12.5 bitcoins.

However, the increasing exchange rate more than offset the decrease in the absolute value of the award: 50 BTCs were worth only $ 500 in mid-2012, while the current award, 12.5 BTC is worth $ 30,000. Moreover, the income of the miners will also come one day from the transaction costs.

Conclusion

We have just examined what the bitcoin mining was, its objectives, for whom; when it is advantageous, where are the graphics cards, and why some manufacturers release their graphics cards without any output display.