Cryptocurrency Mining | Complete Guide

Welcome to the topic “Cryptocurrency Mining.”

So, before getting into cryptocurrency mining, I want to give you insight into “What exactly is bitcoin?”

You probably have heard of the story of Laszlo Hahn back in 2010, who paid his ten thousand bitcoins just for two “Papa John’s” pizzas. “Poor him!”.

 Had he held on to them, he would have been a millionaire by now.

But recently, Laszlo said, “I don’t regret it. I think that being a part of this great invention in its early years is worth that money.”

Undoubtedly, crypto currency has made itself known to the world expeditiously and has increased its value rapidly in just a couple of years.

But the question arises, “What actually is bitcoin?”

Bitcoin is a digital currency or virtual currency, and you can also call it a computer file.

This unprecedented invention can be stocked up in smartphones, computers, or electronic gadgets in your virtual wallets.

Because this virtual money is being known transnationally, and most online companies accept this currency, you can trade with bitcoin globally.

However, some countries do not consider bitcoin as legitimate because of its decentralized, volatile nature and perceived peril to current money systems, and its connections to illegal exercises, such as drug trafficking and tax evasion.

Wait, but who is the creator of cryptocurrency?

The story of bitcoin instigates with the name Satoshi Nakamoto the mysterious guy or shadow or group of some unknown individuals who, on 18th August 2008, unleashed the concept of cryptocurrency through a document file that he/they published online.

Wherein they suggested a decentralized currency system and ways to create it. Satoshi called it a “peer-to-peer electronic cash system,” also known as “Bitcoin.” Furthermore, in 2009 he transformed his big idea into reality by implementing bitcoin as open-source software.

This mystery guy hung around for a couple of years, then ‘all of a sudden’ he vanished away, but in 2012 a guy from Japan claimed that he was Satoshi Nakamoto, but nobody believed him, and later on, he was also gone. Till now, nobody named Satoshi Nakamoto has shown up.

In 2011 Dan Kaminsky, a globally known programmer, tried to unmask this guy and revealed that just one person does not create this cryptocurrency; there is an entire team behind it.

What Motivated or Pushed Satoshi Nakamoto to Create a Cryptocurrency?

 Well, let’s break it down; this mystery guy wanted to create a “trust-less” cash system. Satoshi unequivocally expressed that the purpose behind making this virtual cash system is to eliminate the outsider mediators that are generally needed to lead computerized financial exchanges.

Furthermore, Satoshi added that the Outsiders cause unwanted costs for conducting these services; these expenses are then given to end-clients and can hedge the transactions to a certain level under a specific size.

The expenses that it includes, such as:

1. Covering back-office costs — the exertion it takes to gather and billet value-based information;
2. Taking relevant safety measures — costs button-down with the risk of safety breaches; given that they are unified storehouses of touchy information;
3. Held responsible for the — cost related to refunding cash on account of extortion, among others.

Most of these expenses are fixed for every transaction, paying little mind to the transactions’ size. Be that as it may, since the benefit gathered per trade is generally a percentage of size, the juice doesn’t legitimize the squeezing for handling more modest transactions.

Let’s have a look at bitcoin mining.

Cryptocurrency mining is the foundation of the Bitcoin network; without miners, this world of cryptocurrency will collapse because miners are the only ones who verify the transactions between users and make it secure from being hacked or attacked. As you can see, they require highly specialized computers to mine bitcoins.

Without professional computers, mining cryptocurrencies is not possible.

In the mining process, the miners’ job is to validate the transactions through puzzling computational problems. In fiat currency, it’s quite simple. Suppose you bought a pizza; you cannot repurchase it with the same money you already spent. After all, it’s gone; you ate a big tasty cheesy pizza, so nothing is left.

But in the case of cryptocurrency, it’s the other way around. As you already know, it’s a computer file; why don’t you copy and paste the bitcoins and resell it to somebody else, right? Well, it’s not that easy as it seems. Suppose you would try to double-spend your bitcoins. In that case, you will have to beat the network of thousands of highly skilled professional miners who are firmly and globally connected and competing with each other and validating these transactions and making it secure.

 How Does Bitcoin Mining Work?

What bitcoin mining does? And why do we even need it? People often ask these types of questions.

Mining is the backbone of bitcoin, and it has various aspects, namely,

1.  Security
2. Reaffirm the transactions
3. Create new bitcoins

Security is what makes miners important

In layman’s language, the miner’s job is to secure the network of bitcoin

And they make it hard for the attackers to ambush the bitcoin network.

The more the miners, the more secure the network would be.

There is only one way you can turn around the transaction if you got more than 50% of hash power.

Hash power is distributed among different miners, which makes the bitcoins safe and secure.

Miners reaffirm the transaction

When users make crypto coin transactions, it goes into a pool of unsubstantiated transactions.

At that point, bitcoin miners select the transactions of users and put them into a block.

From that point onward, the Bitcoin Network affirms users’ block and adds it to the blockchain.

Each block added to the blockchain is an additional affirmation for users’ transactions.

Creation of New Bitcoins

Unlike the traditional method of issuing currency wherein the central bank has it under control and can issue currency. Whenever it thinks it is good for the country’s economy, it will increase the production of currency units.

But, miners have to crack puzzling problems to generate bitcoins, which is not an easy task when it comes to cryptocurrency units. It requires expertise and hard work.

Furthermore, there would probably be some miners who think that they could create bitcoins for themselves by playing some tricks but, “it’s easier said than done.” The issuance rate of bitcoins is set in the codes, so cracking that code will come at a price.

So, probably no miner would like to pay such a price, so bitcoins will not come out of thin air. Miners will have to use their expertise, hard work, and computational powers to create a cryptocurrency.

Before diving into the mining world, do you have what it takes to mine?

If you want to mine bitcoins, let me tell you whether it is for you or not. For most people, mining is not that profitable because it consumes high electricity and requires big warehouses to mine bitcoins.

Oftentimes, people look for places where electricity is less expensive, because otherwise creating bitcoins can become too costly.And eking out a profit becomes too difficult. However, if you believe you can have everything required for mining at a lower cost than the profit generated from the cryptocurrency, you are in luck. By looking at the growth rate, we can anticipate that this digital currency will hit the high road in the future, and it’s unpredictable.

So now, without any further ado, let’s get to the job, shall we?   

• Step#1 get the wallet for bitcoin

When you are earning, your bitcoins will directly go into the wallet; it is a password-protected keeper which stocks up your bitcoins, and without it, you will not be able to keep your cryptocurrency secure.

• Step#2 validate the cryptocurrency transaction

 When miners want to earn bitcoins, they need to go through two processes.

1. They need to verify 1-megabyte transactions accurately, which can be very tiny, but its size depends on the number of transactions, which can be in the thousands.
2. Well, this one is a bit tricky because after verifying the transaction, it has to be added to the digital ledger called “blockchain.” But it is not that simple.

To add bitcoins to the blockchain, one must solve the complex computational puzzling problems, also known as “proof of work.” In this mathematical problem, the miner’s job is to get to the 64-digit number (hexadecimal) known as “hash,” which has to be less than or equal to the required hash.

Unfortunately, computers are programmed to spit out the different types of hashes at the rate of MH/s, GH/s, TH/s. So, you will have to keep on guessing the 64-digit numbers until you reach the desired one. So, in simple words, it’s a type of gambling.

Once it is solved accurately and promptly before any other miners do in this race, the miner who guessed it first will be rewarded with a couple of bitcoins generated from the transactions he or his entire team verified and added to the public ledger.

Furthermore, if we talk about the difficulty level, it is increasing every day because there are more miners in the competition, and they are competing with each other. But this bad news does not come alone; we have good news along with it. The difficulty level is adjusted every week, which depends upon the number of miners. If there are more miners, the difficulty level would be hitting the sky. And if there fewer miners, it will become automatically more comfortable. Good news! Right?

Let’s look at the analogy of bitcoin mining and see how it works.

Let’s say you have three roommates, and you tell them that you are thinking of some number between 1 to 50, and the one who guessed it equal or less than your given number will win, and guesses are unlimited. Easy peasy, right?

For instance, you picked 20, and your mate x guessed 25, he will be out of the game because 25>20, and your mate Y guessed 19 and Z guessed 18. Even though both Y and Z are correct theoretically, because the condition is satisfied, both numbers are less than 20. But here Y won’t get the advantage just because he was closer. They both will be treated equally.

Let’s say now; you pose the ‘guess the number I’m thinking of’ question, but instead of asking just three persons, you are asking the entire community of miners that can be in the millions. Instead of ranging the number between 1 to 20, you think of the 64-digit hexadecimal number.

Now can you imagine the difficulty level of guessing the right number? Besides, you are not only supposed to guess the right number, but also have to be the first person to guess it. Well, now that seems a bit tough, right? So, this is how the validating process works. 

• Step#3 Get mining hardware

Computers play a crucial role in guessing. In the early years of mining, miners could mine the bitcoins easily from a desktop computer, but then the performance requirements increased, and consumption of power increased. There is only one way to mine profitably, and that is to use the “Application Specific Integrated Circuit” (ASICs). Because with the older models the cost will exceed the revenue generated from the mining and instead of making a profit you will incur a loss.

• Step#4 Get membership in mining pool

In mining pools, miners form groups and split their power to compete with others collectively, “Two heads are better than one.” It is not easy for an individual to win against a group of miners. And after winning, they split the mined cryptocurrency among participants.

Bottom Line Guide to Becoming a Miner

• If you decide to head down the miner’s road, get a membership in a mining pool.
• Don’t head down this difficult road unless you have a substantial hunger for reading and continuous learning.
•  Always take advantage of the progressing technology changes and new methods for streamlining coin mining results.
• The best bitcoin miners consistently spend hours considering the ideal approaches to improving their bitcoin mining execution.
• If you love it, and you’re prepared to do the difficult and demanding work, it can be a rewarding career path or pathway

Also Read: Is Cryptocurrency The Future?

Also Read: The Rising Drone Technology | What You Should Know

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