What is Bitcoin Mining and How it Works?

in #bitcoin2 years ago (edited)

Decentralised network used to verify and secure Bitcoin transactions from one end to another through a peer-to-peer computer process is Bitcoin Mining. Steps in Bitcoin mining-

1- Verifying whether the transaction is valid or not.
2- Collecting transactions in the form of a block.
3- Select the header of the most recent block and adds it into a new block as hash.
4- Solving the algorithms for proof of work (POW).

When the algorithm is solved then new block is added to ledger which is known as Blockchain and propagates to the networks.

How to mine Bitcoins?
1- Purchase custom mining hardware.
2- Pick an online mining pool like cloud mining.

What is Proof-of-Work (PoW)?
PoW function protects Bitcoin against double spending, which also lets the ledger remain unchanged. In simple words PoW is a method to ensure that the information (new block) was difficult (time consuming, costly ) to be made. PoW cost processing power can be translated to hardware, time and energy. It helps to make Bitcoin mining hard and resource-intensive so that miners can find the blocks (files in which transaction data is permanently stored) which remain steady over time, producing a cash supply that is finite and well managed. If individual blocks contain PoW than they are considered valid. Bitcoin Miners can check PoW every time as they receive a block.

How Does Mining Create New Bitcoins?
Bitcoin mining’s main aim is to allow Bitcoin nodes to reach a reliable and an impenetrable agreement. Mining is also the method used to introduce Bitcoins into the system. When miners mine Bitcoin and their PoW is verified then they are paid transaction fees as well as allowance of newly created coins, called Block Rewards. They both serve the purpose of circulating new coins in a Decentralized manner while inspiring people to provide safety for the system through mining.

What is Bitcoin mining Difficulty?
It’s a measure of how difficult it is to find a Hash reach the target value (a 256-bit number) during Proof of Work. When the difficulty increases, target value decreases and vice-versa.

Let’s see how it work-

bitcoin mining.png

What is Bitcoin Cloud Mining?
Cloud mining or Cloud Hashing enables users to purchase mining capacity of hardware in data centres. Bitcoin cloud mining enables users to earn Bitcoin without managing hardware, software, electricity, band-width or other offline issues; in other words you pay for all these services by entering the hash rate online that you want and the company you paid will mine for you. You don’t have to do anything after paying for cloud mining.

All the Bitcoin mining is done remotely in the cloud. This enables owners to not deal with any of the hassles usually encountered when mining Bitcoin such as electricity, hosting issues, heat, installation or upkeep trouble.

Use only the trusted websites for cloud mining. BEWARE of all the Frauds going on in its name. A homework done before investment is better.

Advantages of Bitcoin Cloud Mining:-
1- No excess heat to deal with.
2- No electricity cost.
3- Quiet due to no constantly humming fans.
4- No Bitcoin mining equipment to sell when it is not profitable.
5- No ventilation problems with hot equipment.

Disadvantages of Bitcoin Cloud Mining:-
1- Beware of FRAUD companies!
2- Unverified or shady Bitcoin cloud mining operations.
3- Lower profits- Bitcoin mining companies also have expenses.
4- Bitcoin mining contracts may have the ability to cease operations or payouts in the contracts if the Bitcoin price is too low.
5- Lack of ability to change the Bitcoin mining software.

To know more about the Crypto World visit our website- http://bitboysinternational.com/


Hello bitcoinboys!

Congratulations! This post has been randomly Resteemed! For a chance to get more of your content resteemed join the Steem Engine Team