Mining 101 – The Basic of Mining Bitcoin
What is Mining?
Mining is basically a process introducing new records of the transaction to the Bitcoin’s public ledger. This public ledger is what is referred to as the blockchain, and it is in place so that all the transactions can be confirmed, and all the network users can access the ledger.
The other area where this helps is in identifying the legitimate Bitcoin operations from any possible attempts of re-spending money that might have been used elsewhere. In simple terms, miners are serving the Bitcoin community by making a public confirmation of every transaction that has been made.
They also ensure that all of them are valid and legitimate. Each time a new block is identified, or sealed off as it commonly referred to, a miner is rewarded. The bounty currently stands at 12.5 Bitcoins for each block that is sealed off. (This rewards halves every 210,000 blocks, roughly every 4 years)
The degree of which new coins are resurfaced can just be compared to the degree in which precious commodities such as gold are mined from their underground sources. This is why the entire process is referred to as mining.
How is Mining Done?
As earlier indicated, Bitcoin mining is a decentralized mathematical procedure that serves two main purposes. The first purpose is to confirm the transaction in a way that is trustful when sufficient computational power is directed towards one block.
The second purpose that Bitcoin mining serves is to issue or create new Bitcoins in each of the blocks. Having elaborated on the main purposes served by the Bitcoin mining process, it is now important to understand how the process works.
- The first step in the mining process is to confirm if all the transactions are legitimate. (A typical block on average contains around 2,500 separate transactions in it). This comes before anything else.
- Once that is done, the transactions are then bundled in one block, and that marks the second step.
- The third step includes picking the header of the most recent block and placing it into the new block. It is inserted therein as a hash.
- The fourth seems to be not only complicated but also the most difficult one. This is where the proof of work arithmetic is solved. It leads to the next and last step of the Bitcoin mining process.
- Once the arithmetic solution has been solved, the new block is then added to the local blockchain. It is also propagated, with immediate effect, to the network.
These are the main steps that are involved in the process of mining a Bitcoin.
The other important term that is important to understand here is proof-of-work. Proof-of-Work is basically a system that makes sure that the new block or the information was time-consuming and costly to be come up with.
The mining process costs a huge processing power that can be translated to time, energy, and hardware. Mining difficulty is an estimate of how it is hard to get a hash power that is way below the target value in the Proof of Work session. The target hash value should be a 256-bit number.
The Hardware & Software Needed for Mining Bitcoin
When Bitcoin was invented some years ago, many view it as an idea that would come to liberate and revolutionise the whole industry. Several miners were drawn to the idea of Bitcoin not because of the gains but just because of its idea.
Back then, powerful computers and laptops were used. This would later be faced out by the use of graphics cards, which used less power. Fast track to these days, the whole process has been transformed into a lucrative investment.
Here are the mining hardware that are currently used:
The Central Processing Unit is the processor of a computer. Although it is very obsolete, there are other miners who are still using this ancient mining hardware.
Graphics Processing Unit
Abbreviated as GPU, this is a collection of top-notch graphics cards. Although they are a bit expensive, the GPU’s can calculate all the complicated polygons that are required in video games, and this has made them the best bet for hashing arithmetic that are used to solve the transaction blocks. Just like CPU, the GPU mining hardware has also disappeared so much with time.
Field Programmable Gate Array – FPGA
This is an advanced circuit designed to be configured once it has been created. They offered the miners with the advantages of ease of use and power efficiency. Whereas a typical 600 MH per second graphics card could consume up to 400 W of power, an ordinary FPGA mining machine would deliver 826 MH per second of hash rate and at 80W of power.
Application-Specific Integrated Circuit
ASIC this is a microchip that has been created to mine BTC at a very swift speed. Its hashing power is 100 times faster than most hardware and it also reduces the usage of electricity than most of the technologies that were used in this industry. The leading one is the AntMiner S9, which comes with a speed of 14,000,000 MH per second.
The Mining Software
Based on the type of equipment you pick, you will have to install mining software. There are certain advanced ASIC miners that are currently being brought in with everything installed in.
Some of the popular mining software are the following:
Among its features are mining pool support and power saving mode. It works with MacOS and Windows devices.
Works with Linux, MacOS, and Windows and comes with several GPU support
While it supports Linux and MacOS devices, it can be used for pool and solo mining.
Other Bitcoin mining software is RPC Miner and BFGMiner.
Cloud mining is the best choice for anyone who wants to invest in mining Bitcoin without buying and managing their own hardware. It is done through buying mining contracts that allow the mining miners to use shared processing power that operates from data centers that are placed in remote locations.
Since miners do not have to deal with software or hardware, mining becomes so easy. The electricity consumption is also lowered. What is needed here are just an obligatory Bitcoin wallet and a communications computer.
Some of the companies offering cloud mining for this virtual currency are the following:
DiscusFish/F2Pool, AntPool, BW Pool, BTCC, BitFury, BitClub Network, Slush, HaoBTC, KnCMiner, and Kano CKPool among others.
These are some of the things you should know about mining Bitcoin, the world’s largest cryptocurrency.