What is bitcoin mining and how does it work to mine bitcoins?
We’ve talked to you before about what bitcoins are, but in today’s article we’re going to go a little further. We are going to explain to you what it is to mine bitcoins and what is the purpose of mining bitcoins.
Where do the bitcoins come from? Unlike traditional monetary systems, where governments print currency when they need it, bitcoins work in a different way. Not being a currency, there is no way to print it as such.
How do the bitcoins appear then? Very simple, they are discovered. As if it were gold fever, computers around the world “Minan” in search of coins competing with each other.
What is the purpose of mining bitcoins? People send bitcoins through the bitcoin network constantly, but unless you keep a record of those transactions, nobody would be able to monitor if someone has paid something. The bitcoin network takes care of this by collecting all transactions made during a certain period in a list, better known as a block. What a miner does, would be to confirm those transactions and write them as if it were an account book, this is known as Blockchain or block chain.
A blockchain is a small file, similar in size to a text message on your mobile. This account book is a very long list of blocks, in which any transaction made anywhere in the chain can be explored. When a new transaction block is created it is added to the blockchain, creating a very long list of all transactions that have been made in the bitcoin network. Each blockchain consists of 3 parts, two of which are very simple: Identify the address (Approximately 34 characters)The history of who has bought and sold. (The account book). The third part, is the Private Key Header Log. To create hash
The miners take the information from a block, apply a mathematical formula and transform it into something different. Create a new, much shorter sequence of apparently random numbers and letters. This sequence is known as hash. The hash is stored inside the block, where it is the end of the chain at that moment.This allows the system to sort the information more quickly and to be found easily but it is a slow and cumbersome process and that is why the miners are needed to do it. But, the miners not only use the transactions of a block to generate a hash, they also use another type of data and one of them is the last part of the last block added to the chain, the header. The header of the blocks is where a sophisticated digital signature is captured to confirm each and every one of the transactions in that bitcoins file. Here a hash is created using the hash of the previous block as an aid.
These digital signatures are the security system that bitcoins use: each and every one of the transactions in a chain of blocks are registered and publicly displayed and with the signature of the digital participant attached to it as a confirmation. Therefore, the blockchain is always protected by design. For example, if you tried to forge a transaction by changing a block that was just added to the blockchain, the hash of that block would also change. So as soon as someone looked at the authenticity, he would easily realize that he is facing a forgery, since the hash would not be the same as the previous block in the blockchain and that block would be cataloged at once as false. Revenue evolution with bitcoin mining
Bitcoin mining is not a guaranteed investment. Indeed, the revenues that can be earned with bitcoin mining depend on several things. The value of BTC (Bitcoin) is the first of all, as the value of Bitcoin fluctuates according to supply and demand. Since the creation of new BTC is stable and limited, an increase in demand for Bitcoin also means an increase in its value, and vice versa. Competition and difficulty is also a predominant factor. The more bitcoin mining, the more mathematically difficult to generate a bitcoin. The Bitcoin network is designed so that the same amount of money is created each month, no matter how many people are working to generate that money. In this way, bitcoin mining is a perfect market. If Bitcoin mining is too profitable, new investors are attracted and dilute earnings. When Bitcoin Mining is not profitable enough, some investors give up, increasing the earnings of stubborn investors.It is also interesting to note that the creation of new BTC is designed to stop gradually. Deprived of this source of income in the coming years, Bitcoin miners will then receive the optional transaction fees. Since transactions with fees will likely be processed more quickly by Mining Bitcoin, banks and network users will be inclined to offer a small fee of a fraction of a cent for certain transactions.
We will bring to you the best mining accessories in the market in our next article. Until then happy reading!