What is bitcoin Mining:-
Bitcoin mining is the process by which new bitcoins
are entered into circulation. It is also the way the network confirms
new transactions and is a critical component of the blockchain ledger's
maintenance and development. "Mining" is performed using sophisticated
hardware that solves an extremely complex computational math problem.
The first computer to find the solution to the problem receives the next block of bitcoins and the process begins again.
Cryptocurrency mining is painstaking, costly, and only sporadically rewarding.
Nonetheless, mining has a magnetic appeal for many investors who are
interested in cryptocurrency because of the fact that miners receive
rewards for their work with crypto tokens. This may be because
entrepreneurial types see mining as pennies from heaven, like California
gold prospectors in 1849. And if you are technologically inclined, why
not do it?
The bitcoin reward that miners receive is an incentive that motivates
people to assist in the primary purpose of mining: to legitimize and
monitor Bitcoin transactions, ensuring their validity. Because many
users all over the world share these responsibilities, Bitcoin is a
"decentralized" cryptocurrency, or one that does not rely on any central
authority like a central bank or government to oversee its regulation.
Why Bitcoin Needs Miners-
Blockchain "mining" is a metaphor for the computational work that nodes
in the network undertake in hopes of earning new tokens. In reality,
miners are essentially getting paid for their work as auditors. They are
doing the work of verifying the legitimacy of Bitcoin transactions.
This convention is meant to keep Bitcoin users honest and was conceived
by Bitcoin's founder, Satoshi Nakamoto.1 By verifying transactions, miners are helping to prevent the "double-spending problem."
Double spending is a scenario in which a Bitcoin owner illicitly spends
the same bitcoin twice. With physical currency, this isn't an issue:
When you hand someone a $20 bill to buy a bottle of vodka, you no longer
have it, so there's no danger you could use that same $20 bill to buy
lotto tickets next door. Though counterfeit cash is possible, it is not
exactly the same as literally spending the same dollar twice. With
digital currency, however, as the dictionary explains,
"there is a risk that the holder could make a copy of the digital token
and send it to a merchant or another party while retaining the
original."
Let's say you had one legitimate $12 bill and one counterfeit of that
same $12. If you were to try to spend both the real bill and the fake
one, someone who took the trouble of looking at both of the bills'
serial numbers would see that they were the same number, and thus one of
them had to be false. What a blockchain miner does is analogous to
that—they check transactions to make sure that users have not
illegitimately tried to spend the same bitcoin twice. This isn't a
perfect analogy—we'll explain in more detail below.
Why Mine Bitcoin?
In addition to lining the pockets of miners and supporting the Bitcoin
ecosystem, mining serves another vital purpose: It is the only way to
release new cryptocurrency into circulation. In other words, miners are
basically "minting" currency. For example, as of February 2022, there
were just under 19 million bitcoins in circulation, out of an ultimate
total of 21 million
Aside from the coins minted via the genesis block (the very first block,
which founder Satoshi Nakamoto created), every single one of those
bitcoins came into being because of miners. In the absence of miners,
Bitcoin as a network would still exist and be usable, but there would
never be any additional bitcoin. However, because the rate of bitcoin
"mined" is reduced over time, the final bitcoin won't be circulated
until around the year 2140. This does not mean that transactions will
cease to be verified. Miners will continue to verify transactions and
will be paid fees for doing so in order to keep the integrity of
Bitcoin's network.
To earn new bitcoins, you need to be the first miner to arrive at the right answer, or closest answer, to a numeric problem. This process is also known as proof of work (PoW). To begin mining is to start engaging in this proof-of-work activity to find the answer to the puzzle.
No advanced math or computation is really involved. You may have heard
that miners are solving difficult mathematical problems—that's true but
not because the math itself is hard. What they're actually doing is
trying to be the first miner to come up with a 64-digit hexadecimal
number (a "hash") that is less than or equal to the target hash. It's basically guesswork.
So it is a matter of randomness, but with the total number of possible
guesses for each of these problems numbering in the trillions, it's
incredibly arduous work. And the number of possible solutions (referred
to as the level of mining difficulty)
only increases with each miner that joins the mining network. In order
to solve a problem first, miners need a lot of computing power. To mine
successfully, you need to have a high "hash rate," which is measured in
terms gigahashes per second (GH/s) and terahashes per second (TH/s).
Aside from the short-term payoff of newly minted bitcoins, being a coin
miner can also give you "voting" power when changes are proposed in the
Bitcoin network protocol. This is known as a Bitcoin Improvement
Protocol (BIP). In other words, miners have some degree of influence on
the decision-making process for matters such as forking. The more hash power you possess, the more votes you have to cast for such initiative
What You Need to Mine Bitcoins-
Although individuals were able to compete for blocks with a regular
at-home personal computer early on in Bitcoin's history, this is no
longer the case. The reason for this is that the difficulty of mining
Bitcoin changes over time.
In order to ensure the blockchain functions smoothly and can process and
verify transactions, the Bitcoin network aims to have one block
produced every 10 minutes or so. However, if there are 1 million mining
rigs competing to solve the hash problem, they'll likely reach a
solution faster than a scenario in which 10 mining rigs are working on
the same problem. For that reason, Bitcoin is designed to evaluate and
adjust the difficulty of mining every 2,016 blocks, or roughly every two
weeks.
When there is more computing power collectively working to mine for
bitcoins, the difficulty level of mining increases in order to keep
block production at a stable rate. Less computing power means the
difficulty level decreases. At today's network size, a personal computer
mining for bitcoin will almost certainly find nothing.
Mining hardware-
All of this is to say that, in order to mine competitively, miners must
now invest in powerful computer equipment like a graphics processing
unit (GPU) or, more realistically, an application-specific integrated circuit (ASIC).
These can run from $500 into the tens of thousands of dollars. Some
miners—particularly Ethereum miners—buy individual graphics cards as a
low-cost way to cobble together mining operations.
Today, Bitcoin mining hardware is almost entirely made up of ASIC
machines, which in this case, specifically do one thing and one thing
only: Mine for bitcoins. Today's ASICs are many orders of magnitude more
powerful than CPUs or GPUs and gain both more hashing power and energy
efficiency every few months as new chips are developed and deployed.
Today's miners can produce almost 200 TH/s at only 27.5 joules per
terahash.
An analogy-
say I tell three friends that I'm thinking of a number between one and
100, and I write that number on a piece of paper and seal it in an
envelope. My friends don't have to guess the exact number; they just
have to be the first person to guess any number that is less than or
equal to it. And there is no limit to how many guesses they get.
Let's say I'm thinking of the number 19. If Friend A guesses 21, they
lose because 21 > 19. If Friend B guesses 16 and Friend C guesses 12,
then they've both theoretically arrived at viable answers because of 16
< 19 and 12 < 19. There is no "extra credit" for Friend B, even
though B's answer was closer to the target answer of 19. Now imagine
that I pose the "guess what number I'm thinking of" question, but I'm
not asking just three friends, and I'm not thinking of a number between 1
and 100. Rather, I'm asking millions of would-be miners, and I'm
thinking of a 64-digit hexadecimal number. Now you see that it's going
to be extremely hard to guess the right answer. If B and C both answer
simultaneously, then the system breaks down.
In Bitcoin terms, simultaneous answers occur frequently, but at the end
of the day, there can only be one winning answer. When multiple
simultaneous answers are presented that are equal to or less than the
target number, the Bitcoin network will decide by a simple
majority—51%—which miner to honor.
Typically, it is the miner who has done the most work or, in other
words, the one that verifies the most transactions. The losing block
then becomes an "orphan block."
Orphan blocks are those that are not added to the blockchain. Miners
who successfully solve the hash problem but haven't verified the most
transactions are not rewarded with bitcoin.
That's all in this blog.Stay Tuned to get more.
