BITCOIN (A new era of currency) by @mondraye
Greetings,
It's your friend @mondraye and today I would be sharing another important content on Bitcoin mining.
Bitcoin is a type of electronic money. But there isn't a central bank in charge of it, unlike the fiat money you're used to. Instead, thousands of computers located all over the world operate the Bitcoin financial system. By downloading open-source software, everyone can take part in the ecosystem.
The first cryptocurrency, Bitcoin, was introduced in 2008 but was officially launched in 2009 following its first transaction. It gives users the option to send and receive virtual currency. Because transactions can be made at any time, from anywhere, and they cannot be censored, they cannot be used more than once.
Unlike other forms of currencies, Bitcoin is permissionless meaning that anyone who is connected to the Internet can make use of it without any hindrance or seeking permission from any authority.
It's digital nature also made it boarderless thus making it a global currency.
Bitcoin is unrestricted, safe, censorship-resistant, and decentralized.
This characteristic has made it useful for use cases where people don't wish to disclose their identities.
Many people choose to save their bitcoins instead of spending them in the long run (also known as hodling). Due to the limited amount of coins, bitcoin has earned value. Being a store of value, It has been compared to precious metals like gold and silver primarily due to its scarcity.
Holders consider it to be the best medium for long-term wealth storage because of these characteristics, as well as its widespread availability and high liquidity. They think that as time goes on, Bitcoin's value will rise.
When @zmoreno conducts a transaction with @reminiscence01, she does not transfer money in the manner you might anticipate. It's not like giving him a $1 cash in a digital format. It's more like she's writing that she's giving @reminiscence01 $1 on a piece of paper so that everyone can see it. When @reminiscence01 goes to send the same amount to @fredquantum, he can see that @reminiscence01 has the funds by looking at the piece of paper.
This digital piece of paper is what we know as the blockchain and all users has an identical copy stored on their various devices.
When a payment is made it is broadcasted across all the networks and because there's no centralized body to process transactions, transactions are processed and recorded through a process known as mining.
Bitcoin transactions are validated and added to the blockchain through a process known as mining. To successfully solve challenging math problems is the aim of miners. Bitcoins and transaction fees are given to miners who are successful in solving these riddles.
Users of Bitcoin may use their personal computers to compete in the early days of mining. Today, mining rigs with a high degree of specialization are necessary for profitable mining. Since solo mining is extremely challenging, many miners choose to join a mining pool to boost their odds of receiving a block reward, which is then divided equally among pool members.
A user who creates a new Bitcoin transaction must wait for other network users (called nodes) to confirm and verify the transaction's legitimacy. It is the responsibility of miners to gather fresh, pending transactions and compile them into a potential block (a new block that is yet to be validated).
Finding a legitimate block hash for a candidate block is the aim of a miner. Each block has a distinct ID, which is represented by a combination of figures and alphabets called a block hash.
- example of block hash
0ebe60de69c62ed8d585f347341d37cf029afd021ab43b3a97faa1acd4b3b93e
The previous block hash, the data from their candidate block, and a nonce must be collected by the miner in other to run everything through a hash function to create a new block hash.
However, the miner must discover a nonce that, when coupled with all the data, will result in a block hash that starts with a specific number of zeros. Based on how difficult it is to mine, the number of zeros varies. The miner's ability to validate their candidate block is demonstrated by a valid block hash (hence Proof of Work).
The only thing a miner can alter is the nonce, which mining rigs do after collecting all of the outstanding transactions and producing their candidate block. Mining machines repeatedly change the nonce and hash the combined data multiple times until they find a solution to that block through a rigorous process of trial and error.
A miner's candidate block can be validated and the bitcoin rewards can be collected as soon as they discover a valid hash. The blockchain transactions included in that block go from being pending to being confirmed at this time as well.
Miners releases new Bitcoins into circulation by getting rewarded with a specified amount of Bitcoin after each successful block mined.
The block reward which is halved after each successful completion of 210,000 blocks which often takes roughly 4 years to complete, started with 50 btc in 2009 and was halved to 25 btc in 2012.
The reward was further reduced to 12.5 btc in 2016 and has been at 6.25 btc since 2020. The next halving is expected to happen in 2024 but untill then, miners currently earn about $143,381 on each successful mine.
- See calcution below
Current BTC block reward = 6.25
Current value per 1 BTC = $22,941
Current block reward in $ = 22,941 X 6.25
current amount earned by miners = $143,381
The above is the current amount earned by miners after the completion of each successful block.
In addition, miners also earn through gas fees. These fees are often paid by those who perfrom cryptocurrency transactions on various blockchain and the amount and method of payment is dependent on thd type of blockchain.
In Bitcoin blockchain, gas fees are paid using BTC which is the native token of the blockchain. This payment is often equivalent to the computing power it requires for a transaction to be verified and recorded by a miner.
The gas is measured is Gwei which is a unit of measurement that comprises of the current demand and supply. The demand is made up of the number of smart contracts needed to be executed while the supply comprises of the available network capacity.
During the times of network congestion (extreme high demand) , the gas fee often increases in other to speed up the transactions.
Click here to further understand how gas fee works following the explanations of Vitalik Buterin.
Anyone can join the mining competition since Bitcoin is a decentralized, open-source system. You could formerly mine new blocks on your home PC. However, you now require more potent machinery as the mining difficulty has increased.
The chances of discovering a good hash are theoretically impossible, but you might still attempt to mine bitcoins using your personal computer. The hash function can be computed quite quickly, but it takes significantly longer to calculate the vast number of random inputs. Because of this, you must now purchase specialized hardware before attempting to become a productive miner.
There's a lot of mining device used in mining and their efficiency is dependent on the level of mining difficulty. Some altcoins can still be efficiently mined using CPU device but when it comes to Bitcoin, a more specialized mining equipment such as Ascis proves to be more effective.
- CENTRAL PROCESSING UNIT (CPU)
The CPU is the part of the computer responsible for distribution instructions across the various parts of a computer. It is formally used in mining Bitcoin but due to the increase in mining difficulty, the CPU mining mechanism is no longer effective.
- GRAPHIC PROCESSING UNIT (GPU)
The GPU is specially work in diving complex tasks into a much smaller and simpler unit thus making it easier to be handled. This is formally used in mining Bitcoin but just like the CPU it has been considered outdated due to the increase in difficulty of Bitcoin mining.
Nevertheless, the GPU is still efficient in mining a good number of altcoins.
- FIELD PROGRAMMABLE GATE ARRAY (FPGA)
This type of cumputer chip can be programmed to serve different functions and perfrom different tasks. It is used by most miners due to its low cost when compared to ASICS but it is still ess efficient in mining Bitcoin.
- APPLICATION-SPECIFIC INTERATED CIRCUIT (ASICS)
.jpg)
This type of application are very efficient in mining cryptocurrency because it is specific in fuction. It is not used in performing other tasks other than mining cryptocurrencies.
It is more expensive than other mining methods because has also proven to be more efficient when it comes to Bitcoin and other cryptocurrency mining.
In as much as ASICS mining is efficient, the chances of mining cryptocurrency independently is very slime due to the massive competition involved. This is why it is best to join a mining pool.
A mining pool is made up of miners who have configured their mining devices to partner with the device of other miners thus increasing their chances of solving the complex mathematical calculation faster than others.
Each block reward is further distributed amongst those in the pool according to the mining power each provides.
This method involves indirect mining. Those without a mining rig or who couldn't cope with the complex and technical means of mining can easily cloud mine by paying active miners to mine for them. The rewards earned are further shared between them and the miner.
Is as much as the method appear to be stress free, it is highly risky because there's no assurance that the money you paid to the miner wikk get back to you talk more of any attached profit.
Also, a lot of cloud mining services have been using this method to scam people of their funds.
It is important that everyone get to understand how mining works. With just the right combination of hardward and software, anyone can participate in the securing the Bitcoin network thus becoming a miner.
In as much as mining is lucrative, it is also tasking and involves a lot of competition which is why it is best for one who has a mining rig to join a mining pool in other to increase their chances of success.
Tweet link
https://twitter.com/SonOfMaaan/status/1552661377327710210?s=19
a very extraordinary explanation which of course is very easy to understand
Thank you.
I'm glad I was able to make it as easy as possible
You've done well with the explanation on Bitcoin mining, it was an incredible read
I'm glad you liked it
This was really detailed and brilliant!
I enjoyed the tutorial.. Steem On!
Thank you for your nice comment
This is full of useful information. Well explained.
Thank you