Bitcoin mining is trending ever since it was invented.
Earlier it was only trending on Google, now it has started trending among the people.
If you are new to the Bitcoin mining and looking to start, you might be wondering-
- What is Bitcoin?
- What is Bitcoin mining?
- How does Bitcoin Mining work?
- What is Proof of Work?
- What is Bitcoin Mining Difficulty?
But, before you begin understanding all of these, you need to learn each and every term that relates to Bitcoin. We have made a beginners’ guide on the same and it will take hardly 5 minutes of yours to understand-
- The definition of Bitcoin
- What is a Bitcoin Address?
- The definition of a Public Key
- What is a Private Key?
- How about the Blockchain? What is it?
- What is Bitcoin Mining?
- The bitcoin rewards
- A digital Bitcoin wallet
So, if you are done with the 5-minute beginners’ guide to understanding the terms related to Bitcoin, you are all set to go one level up.
What is Bitcoin?
Before we begin to understand the Bitcoin mining process, let us help you brush up your knowledge about the Bitcoin and its mining.
Here is what a Bitcoin is in the layman’s language-
What are Nodes?
A node is a computer that executes the program of Bitcoin and is connected to the Bitcoin network.
And, the nodes (or computers) need to be powerful and intelligent enough to understand the requirements, takes their own decisions, and verify the transactions it receives based on the predefined rules.
If the transactions are not as per the predefined rules, they are not passed on to other nodes in the network.
Once, the verification is confirmed, the nodes share the two types of transactions to other nodes in the Bitcoin network-
- Fresh transactions – the ones that are recently added in the network
- Confirmed transactions – the ones that are ‘confirmed’ and written to a file
Every time, a node receives the confirmed transactions, they keep blocks of ‘confirmed’ transactions. They are placed together in a file or ledger called, Blockchain.
A copy of blockchain is kept with each node of the network for security purposes. If any node does not have an up-to-date copy, it asks the other nodes for the updated copy.
Now, what happens to the fresh transactions?
The fresh transactions are again sent to the network until they reach a stage of ‘confirmed’ transactions. And, this process of bringing fresh transactions to the blockchain is called mining.
How does Bitcoin Mining work?
And, here is what the Bitcoin Mining is and how does it work-
Now, you know what is Bitcoin, nodes, Bitcoin mining and how its mining process takes place.
Based on the image above, you can only create new Bitcoins by solving a computerized mathematics puzzle. And, that is executed by the nodes or the miners (mining nodes).
The mathematical puzzle is all about finding a number. That number is within a certain range. The data available in the blocks need to be combined and passed through a hash function. And, this process helps in solving that puzzle by finding that number. Well, this is not at all easy.
So, understand why it is made difficult to crack.
Bitcoin mining is made resource-cornered and difficult only to maintain the stability of the number of blocks being mined by the miners.
Now you know- Bitcoin mining is used for two purposes-
- Introducing new Bitcoins in a decentralized manner
- Ensuring only the secure transactions taking place
Now, the question is- how the nodes find that number/solves the puzzle?
To solve this mathematical puzzle, the miners (mining nodes) just need to guess that random number. But, the hash function does not allow miners to guess the output easily.
So, miners need to combine the number they have guessed and the data that is available in the block with the help of the hash function. And, the result of this hash function is another hash that starts with some zeroes.
Each combination has a different result and hence, it is impossible to guess which number will work.
The miner that is first able to reach to a particular range of the desired number, announces itself to be the winner in the Bitcoin network.
So, the other miners now try their luck and efforts to find another number in the queue.
The winning miner receives the reward as the new Bitcoins. This reward keeps on changing as the rate of the reward changes.
What is the Bitcoin Network Difficulty Metric?
The Bitcoin Network Difficulty is a metric that is used to measure the difficulty ratio to find a new block.
It measures how much difficult it is to find a new block when compared to how easy it can ever be.
This metric is calculated at every 2016 blocks based on the time the nodes took to find the previous 2016 blocks. The desired rate of each block is 10 minutes and it takes two weeks to calculate 2016 blocks.
So, if the previous 2016 blocks took more than two weeks of time, the difficulty ratio is decreased. And, if it took less than two weeks of time, the difficulty ratio is increased.
The blocks released that do not meet the required difficulty rate are rejected by all the miners available in the network and hence, will be of no worth. That means each miner has to make sure the blocks are released as per the difficulty ratio.
What is the Block Reward?
Like we said earlier, that in our guide, we have explained all of the terms related to the Bitcoin and here, it is about the block reward-
So, this was everything about the Bitcoin Mining. Now, you can definitely go and try out your luck and efforts on Bitcoin mining as you’ve got every information required to get started.
Do you have anything that stuck you in the middle of the Bitcoin mining? Share them with us and we would bring up the ways to tackle such hurdles.