What is Bitcoin Mining & How it Works?

What is Bitcoin Mining & How it Works?

January 13, 2018 | By | 2 Replies More

What is Bitcoin Mining & How it Works – Bitcoin is a virtual payment system built on the principle of decentralization. It is the result of the development of cryptography about the last 40 years and is a computer network where all users are connected directly. Today, the bitcoin rate is about 15000 dollars. This article talks about how to start the bitcoins mining and what kind of activities this has features.

Where do the bitcoins come from?

Bitcoins coins do not appear just like that. As with ordinary paper currency, they can not be groundlessly “printed”. It would seem that it forbids us to copy a purse with a certain amount, and double the funds? No, it will not be enriched in this way, since it is equivalent to photocopying banknotes – they remain only copies, but not payment means.

What is Bitcoin Mining & How it Works?What is Bitcoin Mining & How it Works

To create a new coin (bit – “bit”, coin – “coin”), you need to get it. This process is called mining. So, each Bitcoin is a unique “coin” which have its own hash key.

If we copy a memory area with a coin, it doesn’t double, because the hash key also will be copied.

To create a new coin, we need to find a new unique hash key. Bitcoin is a block with information including a hash key of this block, a hash key of the previous block, and also information about transactions. This is called the signature of the block. To create a signature, you need to bypass the entire block chain up to the first, created on January 3, 2009. Bypassing means to perform signature calculations for each block from this circuit. For this process you need equipment with high processing power.

It is impossible to create whole new blocks alone, using a computer or even a video card. Therefore, those who are interested in the work of bitcoins on mining, consolidate into pools – services that combine the computing power of many users.

How to Start Earning BTC?

Before you start mining bitcoins, you need to get a bitcoin-wallet and start generating new blocks in a pool. Approximately until the end of 2013 it could be quite profitable to do this with the help of home computer equipment – the efforts of the processor or video card. The constant complication of the network (every 2016 blocks – introduced specifically so that the number of blocks extracted had a limit and the currency remained liquid) led to the fact that this equipment stopped coping and was replaced by ASIC-processors. These machines are specifically designed for hash calculations, and are literally “sharpened” for mining.

ASIC-farms are about 20-30 times more productive than farms built using video cards, and this difference is constantly growing. To seriously engage in the mining of bitcoins today, it is necessary to have such equipment, otherwise you will not be able to earn even a penny for the whole day.

It should be said that the cost of this equipment is proportional to its performance – for ASIC, able to “fill” at least 500 rubles per day, will have to shell out a few thousand dollars.

Mining Pools

bitcoin miningSuppose we have a suitable farm, and we have already registered the wallet. How to start bitcoin mining? To do this, you need to connect to the pool. In short, a pool is a computer network that distributes the process of calculating hash signatures between its participants. After finding a new block, the network automatically distributes it among its participants, in proportion to their contribution to the common cause.

Pools appeared when the complexity of the network became a big obstacle to the computer hardware of ordinary users. Many then thought that the work of bitcoins on mining became possible only for industrialists with large data centers. However, the pools quickly renewed interest in this process.

The pool to which you connect takes a certain commission from the amount of earned bitcoins, which should also be paid attention to when selecting. Another “underwater stone” is a commission for transferring money to one or another payment system. More complex issues related to showing statistics and tools for control of mining at the initial stage are not so important.

Registration in the pool is very simple: you create an account, and in it you specify your wallet, to which money should be transferred. After that, you need to download any program for mining, for example, 50miner, and enter there the data of your worker (account in the pool). After clicking on the “Mining” button, your equipment will start calculating, and on the pool site you can see how much BTC you have accrued.

Cloud Pools or Cloud Mining

Those who are interested in how to start bitcoin mining, without special equipment, can turn to cloud-based mining services: HashFlare, CCGMining, IQ Mining, etc. It is a lease of computing power available for a large data center. Most often, a specific speed is leased, for example, 10 Gh / s for $ 100 per month.

It is important to know that not all companies that provide cloud-based mining services are honest. Unfortunately, there are many that just imitate mining, and at any moment they can close without ever paying off their customers.

The user will not need to do anything – the cloud service itself connects its equipment to the pool, conducts calculations on it, and the earned money transfers to your bitcoin wallet. Today, this kind of mining can be used to generate a lot of crypto-currency, but the most popular are next ones: Ethereum, Bitcoin, Litecoin, DASH, Zcash, Monero, Ripple, etc

How much can you earn?

Before you start mining bitcoin, you need to think very carefully about the following points:

  • initial cost of equipmentж
  • electricity and cooling costs
  • the rate of complexity of the network and how this affects the profitability of earning bitcoins on mining;
  • the rate of the currency in relation to real currencies and the tendency to change this situation;
  • commission pools for connection and output

At the moment it is difficult to join the mining so that in the first month to get a big profit. Of course, this is possible, but only with the use of ASIC-farms, worth not less than 5000 dollars. Therefore, it is necessary to calculate the payback period of the investments in advance.

hashflare bitcoin cloud mining

It is desirable – taking into account possible exchange rate fluctuations. Especially for this, there are many online calculators for mining, but they must be treated with great care – far from each of them allows you to take into account all the circumstances described above and has reliable information.

Bitcoin will exist, and the extraction of new blocks will continue until about 2032, but it will become much more unprofitable for ordinary users much earlier. While this moment has not come, earnings through pools are still possible. The main thing, before you start mining bitcoins, competently calculate the income and expenses, making sure the profitability of the campaign.

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Comments (2)

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  1. Fin says:

    It seems to me that now almost every citizen of the planet earth knows about bitcoin. After all, this topic is so common. BTC works simply and transparently, so there is no sense to doubt the honesty of this company, just take the time to search for positive reviews, and could already start their first earnings in this area. Bitcoin is very popular, so you can raise a lot of money.

  2. Kerry says:

    Really now there are people who don’t know how to earn on a mining of cryptocurrency? It seems to me that this topic is so important that now even the students in the subject. You do not need much knowledge to work, just register on the right sites, connect created or purchased farms and earn your bitcoins. A bitcoin wallet registration is generally easier than ever!

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Comments (2)

Trackback URL | Comments RSS Feed

  1. Fin says:

    It seems to me that now almost every citizen of the planet earth knows about bitcoin. After all, this topic is so common. BTC works simply and transparently, so there is no sense to doubt the honesty of this company, just take the time to search for positive reviews, and could already start their first earnings in this area. Bitcoin is very popular, so you can raise a lot of money.

  2. Kerry says:

    Really now there are people who don’t know how to earn on a mining of cryptocurrency? It seems to me that this topic is so important that now even the students in the subject. You do not need much knowledge to work, just register on the right sites, connect created or purchased farms and earn your bitcoins. A bitcoin wallet registration is generally easier than ever!

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