What Is Bitcoin Mining?

What is Bitcoin mining? It’s very likely that once we have identified that Bitcoin is indeed money, they will already be thinking about how to acquire some units of this cryptocurrency.

It’s even likely that some of you are thinking of a way that you can create as many cryptosystems as you want and store them in your digital wallet so that you can spend them or trade them around the world, and you’re going to hit a wall.

There is no shortcut where you can create units of this or any other crypto-currency out of thin air.

In fact, cryptocurrency units are being created and released for use by the people who carry out the transaction certification process, known as mining.

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Bitcoin Mining

If you’ve ever thought or heard someone say that because Bitcoin is purely digital, then it’s possible to create as many new Bitcoin units as you want, similar to the way we can, for example, play a photo or song file and have it available for our disposal in our wallet.

If you think something like that, you’re totally wrong and again if you hear someone else say something similar they should help put an immediate end to this rumor because if this were possible it’s certain that no cryptocurrency would be of even the slightest value.

The way new Bitcoins are generated and released is through mining.

The design of the entire bitcoin protocol was intended so that every unit that was generated was from mining, using then resources that in this case are computers to work in the care of this great book where all transactions are recorded by confirming every operation that is done with Bitcoin.

In this way, they should avoid the double expense as well as prevent that someone could create for example a false block out of nothing or some other fraud.

bitcoin mining

 

The Bitcoin Mining Process

In the following image, we are seeing that in the mining process, what is involved in the confirmation of what we know as a block, in order to guarantee its authenticity.

To really understand this it is necessary to talk about what each of these blocks has inside.

To do this it is necessary to explain the process by which a person sends bitcoins from his own wallet to another wallet, which may be to another person or from a company or organization as a form of payment.

These lines that you see, are transactions. Each of these instructions, within the blocks, is what each of the miners has to confirm.

What each of these blocks contains is information that links this new block to all the others.

This is why this technology is called block chaining.

The process is extremely simple, as each of these instructions is how to send a message through Facebook or as basic as sending an email.

You simply have to create the message indicating the amount you want to send and the recipient who in this case we will identify through his bitcoin portfolio address.

An important thing to do when sending the message is to sign the message. For this, we will use the private key that is something we get when we create a Bitcoin wallet.

We then send the message to the network and it immediately takes it and starts replicating it to each of the nodes. That’s why cryptocurrencies like Bitcoin are also called peer network currencies because they use the power of the network to quickly disperse the message so that it fits into a block.

Each of the blocks is made up of the bitcoin sending operations that were carried out during the time interval which is approximately 10 minutes.

When the transactions arrive at the special nodes in the network they are compiled into a block and this is how the mining process begins, in which the processing power of computers is used to solve complex mathematical problems that once they have been solved result in the certification of the transactions and the chaining of the block.

This also leads to the reward for the person who found the solution, being assigned the new units of the cryptocurrency that emerge as new units.

Something to clarify is that not only the block is confirmed and therefore the transactions within it, but this block is chained to all those that were previously confirmed and also all the computers that are connected to the Bitcoin network, which have a copy of this great transaction book, update their book with the transactions of this confirmed block.

This way, everyone involved in the process becomes a guardian of the transactions that happen with Bitcoin, making the risk of fraud practically impossible. Of course, the value of Bitcoin as a currency is also safeguarded, and the units of each crypto-currency found in every Bitcoin portfolio around the world are protected.

 

The Bitcoin Advantage

This is the great power of Bitcoin, which makes it even more secure than traditional financial systems, where all the power of our resources is held by a single central institution that, if its security is breached, only it has the records of each customer’s account.

If these are altered, for example by emptying the personal account of one of you, there would never be a way to recover this money or even worse, the entity as a whole would lose the money of all the individuals who blindly trusted the institution to safeguard the product of its many assets.

These types of collapses often occur not even because there is still a fraud or an attack by someone else but because of mismanagement or sometimes problems in the economy of the country from which these banking institutions that are now transactional originated.

It is for this reason that cryptocurrencies work in a decentralized way and it is always good to remember that the great advantage of this fact is that our money does not depend only on one institution that if it fails we would lose all the patrimony that we have entrusted to it.

 

The role of the Bitcoin miners

Now it’s likely that after understanding more about the mining process we will want to become a Bitcoin miner or even any other cryptocurrency and more if we already have computers.

This is because it is a very attractive idea to put our personal computer, our laptop, to work in such a way that if we solve and certify the block, we can claim the reward.

That is to say, the new crypto-currency units that were created will reach us at our address in our Bitcoin portfolio.

However, with Bitcoin’s increasing popularity many people have become interested in becoming miners and unfortunately, the reward for the crypto-currency units can only be given to a single miner for each block.

In fact, it is given to the first person who solves the mathematical problems that certify that block.

Therefore, there is fierce competition as more and more people identify the potential of Bitcoin and therefore become interested in becoming miners.

 

Supercomputers

As we have just mentioned, the allocation of the reward is only for money and fair is what has caused the people most interested in winning the race to invest large sums of money from their savings to acquire increasingly powerful computers or even computers specifically designed for this purpose that are known as ASICs.

In fact, they are arrangements that are set up to specifically perform the mathematical calculations that corroborate the authenticity of the transactions that are taking place.

Since such arrays of computers are expensive, the consequence is that normal people can’t easily compete with their traditional desktop and laptop computers since they don’t have as much processing power and can’t then fight against these huge arrays of computers dedicated exclusively to Bitcoin mining.

 

Groups of miners

A trend has even emerged in which groups of miners are created that simply group together and contribute their resources to the group.

These resources with which individually they will not be able to compete but that precisely by working together they effectively manage to solve the calculations before any other and in that way they achieve the allocation of the reward.

Read also: 14 Myths About Bitcoin: True or False?

However, this has the disadvantage that once they’ve been the first to confirm the block for example, and the crypto-currency units have been given it, they have to divide it up among all the members, causing each one to get a considerably smaller share.

But many prefer to get that low reward than to get nothing at all.

 

How do you get Bitcoins?

The chances that each of us has if we really want to get bitcoins are three:

Getting Bitcoins through mining
Performing jobs that are paid for with Bitcoin
Bitcoin Trading

 

Getting Bitcoins Through Mining

Here we talk about the first one in which it is, unfortunately, an option that is usually not viable, almost for any regular Bitcoin user for any normal person and it is that this option involves acquiring these ASIC type computer arrays and that we know are quite expensive but in this way we can become miners and thus obtain, in this competition, a very good possibility of being the ones who obtain the new crypto units for each block that is confirmed.

We could even join a group of miners and we know that it would reduce the profit a little bit but by giving us all the processing power that we acquire with this investment, we make that group of miners stronger and the reward is obtained.

Again, the big disadvantage is that you have to invest a lot of money to be able to acquire all these computer arrays that become quite expensive.

The other is that, if we join a group of miners, even though we get the reward from that group, it has to be redistributed to be equitable among all those who participated and we get a small portion.

 

Doing work that pays with Bitcoin

The second option, adopted by many people around the world, is to carry out activities in which they are experts and in which the payment is with Bitcoin.

That is to say, to carry out some work in which it is established that the payment is made with Bitcoin, and in fact, it’s becoming more and more common for this type of activity.

For example, there are some websites that conduct surveys and the payment they offer us is with Bitcoin.

Also, you can work from home using a personal computer, doing work like graphic design, programming or other work in which we are paid with Bitcoin.

 

Bitcoin Trading

There is also a third option, which is the trading of Bitcoins or cryptocurrencies.

What is the meaning of Bitcoin or Kryptomone digital currency trading? This is a question with two answers because there’s actually more than one way to gain exposure to the crypto market.

The first and most common is to buy coins through an exchange. If you choose this method, you will have to pay for them upfront and you can only make a profit if they increase in value.

Alternatively, you can use derivatives to speculate on Bitcoin price movements without taking possession of the underlying currencies, this gives you the flexibility to trade falling markets as well as rising ones and allows you to open a position at leverage, which means that you only need to deposit a small deposit known as margin to gain much greater market exposure.

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