Lets look at How Does Bitcoin Mining Work and What is Bitcoin Mining Actually Doing. Then take a look at the Best Way to Mine for Bitcoin by How to Start Bitcoin Mining. Lets take a look at these questions and Answer them now:
How Does Bitcoin Mining Work?
Every day you either hear people talk about how bitcoin mining works or how they started bitcoin mining, or see references on the internet to other cryptocurrency coins. Maybe you are wondering about it and you have probably gotten confused while trying to fathom where bitcoin is gotten from (most definitely not from the ground as some people may be led to believe) and so how does bitcoin mining work? Lets take a look.
The bitcoin system was created to provide a decentralized way of exchanging tokens of value without being bothered by intermediaries like banks. Rather every important record is decentralized and sent to a blockchain which is a ledger that contains the history of every bitcoin transaction.
A valid question to ask about how bitcoin mining works is, if the system is decentralized, who then decides the validity of transactions and what transactions can be added to the blockchain? And how can the system be guarded against double-spending? The very simple answer to that question is by mining for bitcoin.
Why is it called Bitcoin Mining?
First of all, you cannot physically see or touch bitcoin. Secondly, it is called “Bitcoin Mining” because you are actually mining or digging through the design of a computer protocol, where bitcoins exist. This can be likened to digging the earth for minerals like gold, diamonds, and others.
Bitcoin Mining Modus Operandi
What is Bitcoin Mining Actually Doing:
Nodes (powerful computers that operate the bitcoin software and helps in the continuity of bitcoin by engaging in the exchange of information)collect some pending bitcoin transactions and send them to the blockchain; this done by solving complex mathematical puzzles which are part of the bitcoin system, then the answers are included in the block. To solve the puzzle, a nonce (number used once) needs to be discovered which when fused with the data contained in the block and sent via a hash function, gives an outcome that is within a range. (Between 0 and 4294967296 is where the nonce is)
The number is gotten by guessing at random and throwing around different possible outcomes. Predicting the result of the output is impossible and that is because there is a hash function (a hash function is a keyless one-way encryption.) hence the miners use the hash function combined with the data in the block and a guessed number.
When a hash is gotten within the desired range, the miner announces the victory to the network, work immediately stops on that block and the other miners move to the next block to solve for the mystery number. The reward for the victorious miner is some bitcoin. (12.5 bitcoins for each successful mining)
How Bitcoin Mining works, however, is not an easy task because there are numerous nodes also contending for the reward, hence, you have more chances if your node is able to solve more than the others, and this involves having the best hardware- but remember the power consumption of heavy mining hardware.)
Bitcoin miners work as auditors, it is their job to verify previous transactions, this way, the risk of double-spending is reduced.
And that is how bitcoin mining is done, as brilliant as the system is, there are weaknesses, and one of such weakness is maintaining that feature of decentralization.
Lets look at what is needed how to start bitcoin mining and what a mining rig actually is first so we know what we are talking about.
What is a Mining Rig?
A bitcoin mining rig is what you need to mine bitcoins with. It is just a term used for the entire setup needed to bitcoin mine.
There are a few main components to the rig and several things to consider before setting up your bitcoin mining rig.
How To Start Bitcoin Mining
1st Step How to Set Up and Start Mining for Bitcoins
You may have heard crypto mining or bitcoin mining a couple of times and wondered just how it was done?
First thing to consider before setting up the bitcoin mining rig is the hardware.
The bitcoin mining hardware has three main classes; the difference between these three classes of hardware is that each one is more powerful and expensive than the last.
Before selecting the hardware to start bitcoin mining though, it is imperative that you consider two main things:
It is important that you check how much energy the hardware will consume, because when bitcoin mining begins, power consumption increases and Bitcoin Mining Costs increase. You do not want to incur more electricity bills than you can handle. States, Provinces, and Countries with lower hydro rates are key to earning more with bitcoin mining.
Hash rate refers to the per second calculations of the hardware while processing a mathematical problem. The measurement of Hash rates are in megahashes per second (MH/sec), gigahashes per second (GH/sec), and terahashes per second (TH/sec).
From the above, it is safe to deduce that the higher your hardware, the higher the hash rate, the more possibility of cracking a transaction block, the more power is consumed. So your bitcoin mining hardware is important.
You Need Bitcoin Mining Hardware to make Bitcoin Mining work
Three main classes of Bitcoin Mining Hardware:
As stated earlier, there are three main classes of bitcoin mining hardware and they are:
This is the least on the list, it is the least powerful and it is just your regular computer. Hypothetically it is very possible to mine bitcoins using your computer’s central processing unit, but it takes a whole lot of time. However, it is possible to upgrade your computer by adding a graphics card. You can either get an ATI manufactured graphics card or from NVIDIA (The two are graphic card manufacturing giants).
This is an integrated circuit created to be setup for operation after building it, the Field Programmable Gate Array helps the mining hardware manufacturer to purchase a large number of the chips, and then configure them for bitcoin mining. The custom setup makes them perform much better than the GPUs and CPUs.
This is the big guy, the Application Specific Integrated Circuit is created for the sole purpose of mining bitcoins at break-neck speed and incredibly low energy consumption.
You need to also put into consideration, the mining profitability. There are online calculators for this operation. All you do is input hash rate, current bitcoin price and power consumption. This way you know the duration before ROI.
After choosing your hardware, there is one more important step in how to start bitcoin mining that you need to do before you can begin mining for bitcoins:
How to Start Bitcoin Mining 2nd Step is Software
To Start Bitcoin Mining You must Download Software
To make use of the hardware on your computer, you will need to install and run software for the hardware chosen. Where GPUs and FPGAs are concerned, your computer will need two sets of software
Bitcoin Client Software
The standard bitcoin client helps with the connectivity between the computer and the network, for interaction with bitcoin clients.
How Does Bitcoin Mining Work with Software
This software gives the hardware the instructions to start mining (solving mathematical problems). However, some ASIC miners do not need the mining software as they come with the pre-configuration and bit coin address.
After setting up your bitcoin mining rig, you may need to join a mining pool. A mining pool is basically a collection of bitcoin miners combining the powers of their respective computers to mine more bitcoins.
That is all there is to setting up your bitcoin mining rig and how you can start bitcoin mining today for your share of 21 million free bitcoin. For more detailed information there are guides and training courses you can take to make bitcoin mining simple step by step.
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