Bitcoin Mining

Bitcoin Mining

 Bitcoin Mining 

Bitcoin is considered as the starting point of cryptocurrencies. Bitcoin uses peer-to-peer networks and Blockchain maintains the ledgers of balance and transactions in a decentralized manner. Bitcoin mining results in getting Bitcoins as a reward for validating Bitcoin transactions. The proof of approach and computational details and necessary equipment are the core factors for mining. Other economic factors that influence bitcoin mining are fluctuation in the prices of Bitcoin, electricity charges, efficiencies of mining equipment, and mining pool all around the world which directly impact the profitability of mining. Bitcoin mining could be tested against three points: the procedure of mining, the necessary processing power, and its potential for profitability. 

The Procedure of Mining: Normally in a server-based network, every request is integrated at the server, and based on the server’s approval, data is given to the requester. On the contrary, in peer-to-peer network working logic, every member computer of the network acts as a file server as well as a client which enables each computer to communicate with the other members in both ways, thus ensuring an independent environment. All computers in the network are at the same hierarchy. The absence of one main server makes the whole network decentralized, thus keeping it open to all aspiring mining candidates. The purpose of the peer-to-peer system is to provide a communication channel to inform all the bitcoin miners about new Bitcoin blocks and transactions. When a miner wants to add a new block to the Blockchain or make a transaction, other miner’s computer has to examine and validate the event and provide permission to it. Thus, communication between miner’s computers is vital. 
Mining program determines the currently pending transactions which could be grouped into the next block of transactions and is sent to the other computes which examine and validate the solution and once confirmed, is attached with the other blocks. The same action repeats with the creation of all new blocks, resulting in the formation of Blockchain. Block’s data are permanent in nature. The creator of a block is rewarded with a fixed number of Bitcoins. 

Equipment efficiency in mining: On an average, a new block could be added in 10 minutes. Bitcoin mining started with the usage of CPU (Computer Processing Units). Gradually with the increase in the complexity of calculation required for transaction validation, investors started using GPU (Graphics Processing Units). Later on, FPGA (Field Programmable Gate Arrays), the hardware came into picture with an efficiency of 100 times than to GPU. Then ASIC (Application Specific Integrated Circuit), upgraded hardware, specifically designed for speed mining, came up for mining. It indicates that the faster the mining equipment is, the higher is the probability to get the correct combination of new blocks. Hash rate is the measuring unit of mining speed. 

The Profitability of Mining:  Based on the successful block creation, the creator is awarded a particular number of Bitcoins. The Bitcoin protocol has a system called “Halving”, which reduces the reward Bitcoin by 50% with periodic intervals. Halving happens after every 210,000 blocks are mined, nearly four years. With the increasing difficulty and cost, especially electricity, individual miners came up with a concept of the mining pool. The mining pool is used to gather people from various locations to consolidate their computing powers and result in successful block creation. Earning is distributed amongst participants, proportionally. This is an attempt to compete with large corporate players.  

Thus, Bitcoin mining depends mainly on the speed of equipment used and the adoption of various ways to curb the running expenses and convert the whole mining process profitable. Platforms like MLM diaries, provide vast information on Bitcoin mining, which seems to be unavoidable to become an expert miner.

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  • 11 September, 2020
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