How Bitcoin Mining Works - Coindesk
In traditional fiat money systems, governments simply print more money when they need to. But in bitcoin, money isn’t printed at all – it is discovered. Computers around the world ‘mine’ for coins by competing with each other. People are sending bitcoins to each other over the bitcoin network all the time, but unless someone keeps a record of all these transactions, no-one would be able to keep track of who had paid what. The bitcoin network deals with this by collecting all of the transactions made during a set period into a list, called a block. It’s the miners’ job to confirm those transactions, and write them into a general ledger. This general ledger is a long list of blocks, known as the 'blockchain'. It can be used to explore any transaction made between any bitcoin addresses, at any point on the network. Whenever a new block of transactions is created, it is added to the blockchain, creating an increasingly lengthy list of all the transactions that ever took place on the bitcoin network. A constantly updated copy of the block is given to everyone who participates, so that they know what is going on. But a general ledger has to be trusted, and all of this is held digitally. How can we be sure that the blockchain stays intact, and is never tampered with? This is where the miners come in. When a block of transactions is created, miners put it through a process. They take the information in the block, and apply a mathematical formula to it, turning it into something else. That something else is a far shorter, seemingly random sequence of letters and numbers known as a hash. This hash is stored along with the block, at the end of the blockchain at that point in time. Hashes have some interesting properties. It’s easy to produce a hash from a collection Continue reading >>
How Bitcoin Mining Reallyworks
Software Engineer | Computer Science & Business Student @ University of Waterloo & Wilfrid Laurier University | subhan-nadeem.com/linkedin As Bitcoin approaches mainstream adoption and recognition, its fundamental security model, characterized as mining, is being put under the spotlight and scrutinized more and more everyday. People are increasingly concerned about and interested in the environmental impact of Bitcoin mining, the security and degree of decentralization of the underlying model, and even the potential impact of a quantum computing breakthrough on the future of Bitcoin and other cryptocurrencies. Often times, proof-of-work is described as a cryptographic puzzle, but what is that puzzle, really? In order to truly understand these questions (and any possible answers), you need to have a fundamental understanding Bitcoin mining itself and its evolution. This article will explore all the technical components and moving parts of proof-of-work, and how they seamlessly synchronize with one another to allow Bitcoin to be the decentralized platform it is today. Why Mining Works: Cryptographic One-WayHashing The Bitcoin blockchain is often described as a database that is cryptographically secure and, subsequently, immutable. The underlying technology that powers this immutability and security is cryptographic hashing. A cryptographic hash function is a mathematical function that, simply put, takes any input and maps it to a fixed-size string. However, there are four special properties of these functions that make them invaluable to the Bitcoin network. They are: Deterministic for any input into the cryptographic hash function, the resulting output will always be the same. Fast Computing the output of the hash function, given any input, is a relatively fast process Continue reading >>
Explainer: How Bitcoin Mining Works [video]
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Bitcoin: What Does Mining A Bitcoin Really Mean? | The Economic Times
ET Home Industry Banking/Finance Banking What does mining a bitcoin really mean? 2017 was the year when curiosity about the Bitcoin hit an all-time high, thanks largely to a dramatic surge in its value. Notwithstanding recent fluctuations in its price, interest remains strong in the original cryptocurrency, which was launched in 2009. One question everybody has is what is the process of 'mining' that creates new Bitcoins and how does the blockchain technology underpinning the cryptocurrency really work. Here's how... Continue reading >>
Bitcoin Mining - What Is It And Is It Profitable In 2018? A Beginner's Guide
Last updated on November 24th, 2017 at 08:12 am Before we start, if youre new to Bitcoin mining and dont know what it is watch this short and simple explanation: The short answer would be It depends on how much youre willing to spend. Each person asking himself this will get a slightly different answer since Bitcoin Mining profitability depends on many different factors. In order to find out Bitcoin mining profitability for different factors mining profitability calculators were invented. These calculators take into account the different parameters such as electricity cost, the cost of your hardware and other variables and give you an estimate of your projected profit. Before I give you a short example of how this is calculated lets make sure you are familiar with the different variables: Bitcoin Mining terms you should get to know Hash Rate A Hash is the mathematical problem the miners computer needs to solve. The Hash Rate is the rate at which these problems are being solved. The more miners that join the Bitcoin network, the higher the network Hash Rate is. The Hash Rate can also refer to your miners performance. Today Bitcoin miners (those super powerful computers talked about in the video) come with different Hash Rates. Miners performance is measured in MH/s (Mega hashper second), GH/s (Giga hash per second), TH/s (Terra hashper second) and even PH/s (Peta hashper second). Bitcoins per Block Each time a mathematical problem is solved, a constant amount of Bitcoins are created.The number ofBitcoinsgenerated per block starts at 50 and is halved every 210,000 blocks (about four years). The current number of Bitcoins awarded per block is 12.5. The last block halving occurred on July 2016 and the next one will be in 2020. Bitcoin Difficulty Since the Bitcoin network i Continue reading >>
Bitcoin Mining Explained: How It Works, How Much Energy It Uses And What Needs To Be Fixed
Bitcoin mining explained: How it works, how much energy it uses and what needs to be fixed I am a journalist for City A.M. reporting on the Industrials sector, including oil and gas, mining, defence, energy and utilities. I also write about the Pharmaceuticals sector. The cryptocurrency has staged a meteoric rise in 2017 that has attracted new investors, but, for many, question marks still surround bitcoin and the technology behind it. With recent reports pointing to the high energy cost associated with mining, the process used to create bitcoin, is there any way to fix it? Here are all your questions answered. Just as gold miners produce the worlds supply of gold, so do bitcoin miners produce all the digital currency available to the market - but, naturally, it is a bit more complicated than that. Mining is the process of adding transaction records to bitcoins public ledger, or the blockchain. Read more: Bitcoin explained: What is it? Why did its price rise? What's next? First of all, the blockchain is, simply, a chain of blocks. Miners use a special software to solve mathematical problems that both confirm legitimate transactions, or blocks, and create new bitcoins, adding new transactions to the blockchain about every 10 minutes. The hash rate is the number of calculations a piece of hardware can make every second as it works to solve that maths problem, and the higher the hash rate, the more likely a miner is to solve a transaction and thus be rewarded with a set amount of bitcoin. The difficulty of mining bitcoin is part of its design. The ideal average mining time is 10 minutes per block, and if that falls, the process becomes more difficult with the aim of keeping the block creation rate stable. There are a total of 21m bitcoins that can be mined, at which point Continue reading >>
Can You Really Make Money Mining Bitcoins?
Can You Really Make Money Mining Bitcoins? Profits are not easy to come by. Expensive hardware and risky cloud mining deals are the main challenges. If you want to join in the bitcoin frenzy without simply buying the digital currency at today's inflated prices, then bitcoin mining is another way to get involved. However, mining bitcoins does come with expenses -- and risks -- of its own. And the more popular bitcoins become, the harder it is to mine them profitably. Unlike paper currency, which is printed by governments and issued by banks, bitcoins do not come in any physical form. That creates a major risk, as hackers could theoretically create bitcoins from nothing. Bitcoin mining is how the bitcoin network keeps its transactions secure. Bitcoin transactions are secured by blockchains , which make up a public ledger of transactions. Because of how blockchain transactions are structured, they're extremely difficult to alter or compromise, even by the best hackers. But in order to secure these transactions, someone needs to dedicate computing power to verifying the activity and packaging the details in a block that goes into the bitcoin ledger. And that's precisely what bitcoin miners do. As a reward for doing the work to track and secure transactions, miners earn bitcoins for each block they successfully process. The bitcoin founders have set a limit of 21 million bitcoins available for mining. Once that total is reached, miners will still be able to benefit from transaction fees, but they won't be granted bitcoins as a reward for their work. As of mid-January 2018, approximately 16.8 million of those 21 million bitcoins have already been mined.Assuming the bitcoin mining industry doesn't change dramatically, it looks like we won't hit the 21 million-bitcoin limit un Continue reading >>
How Much Energy Does Bitcoin Mining Really Use? It's Complicated
How much energy does bitcoin mining really use? It's complicated Bitcoin hype has reached an all-time high. But if running the bitcoin network uses up as much yearly electricity as a medium-sized country, is it worth it? Bitcoin chews through masses of energy, but exactly how much is up for debate. Regardless of the actual number, it's climbing so is the environmental cost of the digital currency becoming too high? In short, its complicated. So lets look at the numbers This being bitcoin , the numbers are confusing and largely made up. Power consumption is one of the major costs of bitcoin mining, as dedicated machines crunch the algorithms that build a record of every single bitcoin transaction and are rewarded with tiny fractions of a bitcoin for their efforts. As mining gets more difficult, it requires increasingly powerful hardware to be competitive. As the value of the digital currency goes up and it's skyrocketed this year miners are more likely to invest in ever more sophisticated hardware. Back in 2009, you could mine competitively with your desktop computer, but now you'll need specialist hardware, such as the Antminer S9 a dedicated mining rig that weighs six kilos and costs well over 1000 before you even start thinking about the electricity bill That evolution, as well as the global spread of miners, makes it difficult to assess exactly how much energy is spent on the digital checks that underpin bitcoin, but there are plenty of people trying to get a handle on just how much power it's chewing through. Why does energy consumption matter? Regardless of whether bitcoin is a bubble or not, we're investing heavily in infrastructure and burning through huge amounts of energy. If this is going to be a viable alternative financial system, it needs to be financially Continue reading >>
Bad News For Bitcoin Miners: It's No Longer Profitable To Create The Cryptocurrency, By Some Estimates
Bitcoin has dropped to a point where it's not that profitable to produce, according to some estimates. "Bitcoin currently trades essentially at the break-even cost of mining a bitcoin, currently at $8,038 based on a mining model developed by our data science team," Fundstrat's Thomas Lee said in a report Thursday. Fundstrat's model incorporates three factors: the cost of equipment, electricity and other overhead such as maintaining cooling facilities. The cryptocurrency traded mildly lower, near $8,000, Thursday, according to CoinDesk's bitcoin price index, which tracks prices from four major global exchanges. Earlier, bitcoin hit a low of $7,676.52, its lowest since Feb. 8, according to CoinDesk data. Bitcoin is created through an energy-intensive "mining" process that uses high computing power to solve a complex mathematical equation, proving an anonymous miner used the process the network agreed upon to build the blockchain record of transactions. Miners then get bitcoin in reward for successfully completing the equation. If the cost to create bitcoin exceeds the reward, miners theoretically lose incentive. "In some cases the miners may simply turn off the machines until the price comes back a bit," said Shone Anstey, co-founder and president of Blockchain Intelligence Group. "It's got to be getting to the point that some of them may be losing money." Bitcoin mining today requires custom hardware that can cost several hundred to a few thousand dollars. And like much technology, more efficient equipment is always coming out. In fact, the need to regularly replace equipment accounts for more than half the cost of mining, according to Fundstrat's model, said Sam Doctor, head of quantitative data science. He assumes electricity costs of 6 cents per kilowatt hour and oth Continue reading >>
Is Bitcoin Mining Profitable?
In recent months, interest in cryptocurrencies has surged as bitcoin and other cryptocurrencies have skyrocketed in value. At one point in December, the price of a single bitcoin was above $20,000, and the boost in price also impacted other cryptocurrencies, with 3thereum selling for more than $1,400 and litecoin reaching above $190. While buying on an exchange like Coinbase is usually fairly simple (and you can even buy fractions of cryptocurrencies), there are those who prefer to mine their coins. But does it make sense to mine cryptocurrencies when you can just buy them and hold onto them? How Profitable Is Mining Your Own Cryptocurrency? Mining cryptocurrencyseems like a no-brainer. Set up a computer to help solve complex math puzzles and you are rewarded with a coin (or a fraction of a coin). Back in the day, the first bitcoin miners were able to earn coins relatively quickly just using what computing power they had in their homes. Today, cryptocurrency mining is a little more complicated and involved. With bitcoin , the reward is halved every four years. On top of that, serious miners have built huge arrays to mine, making it harder for smaller miners to compete. You can join a bitcoin mining pool to be more effective, but that comes with a fee, reducing your profits. Some crypto miners instead opt for other currencies. Its possible to mine ether, litecoin, monero, z-cash, and a number of other cryptocurrencies. Some of these cryptos are worth very little in U.S. dollars. However, its possible to use what you mine and convert it into fractional bitcoins on an exchange, and then hope that BTC gains in value. No matter what you decide to mine, though, you have to account for your setup costs. You need to buy the right equipment, including, in some cases, graphics c Continue reading >>
How Bitcoin Mining Works - Coindesk
When you hear about bitcoin mining, you envisage coins being dug out of the ground. But bitcoin isnt physical, so why do we call it mining ? Because its similar to gold mining in that the bitcoins exist in the protocols design (just as the gold exists underground), but they havent been brought out into the light yet (just as the gold hasnt yet been dug up). The bitcoin protocol stipulates that 21 million bitcoins will exist at some point. What miners do is bring them out into the light, a few at a time. They get to do this as a reward for creating blocks of validated transactions and including them in the blockchain. Backtracking a bit, lets talk about nodes. A node is a powerful computer that runs the bitcoin software and helps to keep bitcoin running by participating in the relay of information. Anyone can run a node, you just download the bitcoin software (free) and leave a certain port open (the drawback is that it consumes energy and storage space the network at time of writing takes up about 145GB). Nodes spread bitcoin transactions around the network. One node will send information to a few nodes that it knows, who will relay the information to nodes that they know, etc. That way it ends up getting around the whole network pretty quickly. Some nodes are mining nodes (usually referred to as miners). These group outstanding transactions into blocks and add them to the blockchain. How do they do this? By solving a complex mathematical puzzle that is part of the bitcoin program, and including the answer in the block. The puzzle that needs solving is to find a number that, when combined with the data in the block and passed through a hash function, produces a result that is within a certain range. This is much harder than it sounds. (For trivia lovers, this number is Continue reading >>
7 Reasons Bitcoin Mining Is Not Profitable Or Worth It In 2017
Jordan Tuwiner Last updated June 13, 2017 The early days of Bitcoin mining are often described as a gold rush. Satoshi Nakomotos invention of Bitcoin, a peer-to-peer electronic cash system, opened up an entirely new frontier, not just of freedom but of occasionally outrageous profits. Those with a strong interest in such things, namely cypherpunks, cryptographers, technically-minded libertarians and assorted hackers, were first to stake their claim. But is there still gold in them thar hills? Bitcoin mining has grown from a handful of early enthusiasts into a cottage industry, into a specialized industrial-level venture. The easy money was scooped out a long time ago and what remains is buried under the cryptographic equivalent of tons of hard rock. Only those with specialised, high-powered machinery are able to profitably extract bitcoins nowadays. While mining is still technically possible for anyone, those with underpowered setups will find more money is spent on electricity than is generated through mining. In other words, mining wont be profitable at a small scale unless you have access to free or really cheap electriciy. Well explain this situation in depth but first, you need to know a few basic technical terms from the world of Bitcoin mining: A group of Bitcoin transactions, chosen from the mempool (the list of all currently pending transactions) and recorded by a miner into the ever-growing record of blocks known as the blockchain. A new block is created on average every ten minutes. This is the cryptographic work which miners perform in order to find the solution which allows them to define a new block. PoW hashing ensures the proper function of the Bitcoin blockchain. Miners compete to solve a cryptographic puzzle, known as a hash. There are no shortcuts in Continue reading >>
How To Get Started With Bitcoin Mining.
Before you read further, please understand that most bitcoin users don't mine! But if you do then this Bitcoin miner is probably the best deal. Bitcoin mining for profit is very competitive and volatility in the Bitcoin price makes it difficult to realize monetary gains without also speculating on the price. Mining makes sense if you plan to do it for fun, to learn or to support the security of Bitcoin and do not care if you make a profit. If you have access to large amounts of cheap electricity and the ability to manage a large installation and business, you can mine for a profit. If you want to get bitcoins based on a fixed amount of mining power, but you don't want to run the actual hardware yourself, you can purchase a mining contract. Another tool many people like to buy is a Bitcoin debit card which enables people to load a debit card with funds via bitcoins. Bitcoin mining is a lot like a giant lottery where you compete with your mining hardware with everyone on the network to earn bitcoins. Faster Bitcoin mining hardware is able to attempt more tries per second to win this lottery while the Bitcoin network itself adjusts roughly every two weeks to keep the rate of finding a winning block hash to every ten minutes. In the big picture, Bitcoin mining secures transactions that are recorded in Bitcon's public ledger, the block chain. By conducting a random lottery where electricity and specialized equipment are the price of admission, the cost to disrupt the Bitcoin network scales with the amount of hashing power that is being spent by all mining participants. During mining, your Bitcoin mining hardware runs a cryptographic hashing function (two rounds of SHA256) on what is called a block header . For each new hash that is tried, the mining software will use a diff Continue reading >>
What Is Bitcoin Mining And How Does It Work?
What Is Bitcoin Mining and How Does it Work? The process of actually getting bitcoins, aka mining, can be expensive and time-consuming. Is it worth the rewards? Against all odds, Bitcoin is still around. People remain interested in learning what Bitcoin is , how to get them, whether as a currency to buy or an investment to hold or trade . It hasn't been easy, and you could reasonably argue it's still a struggle as Bitcoin continues to crater the way it's been doing all of 2018, but somehow it is surviving. The Bitcoin industry has advancedso muchthat owning Bitcoin is now as simple as downloading a Bitcoin wallet and making a purchase. That works well for small investments. But not everyone is content with buying a little bit of Bitcoin. Some would rather be more hands-on in their approach, and that is when they turn to Bitcoin mining. Bitcoin mining isn't easy, and it's not for everyone. It is expensive, so you will need to make sure you have the necessary funds before you give it a shot. It's time-consuming, so you'll need patience. And it's a process that could have tremendous ramifications for the environment, so you have to ask yourself: is it worth all that? It's costly, and making money off of it can take years, if it happens at all, but it's still possible to break even or potentially make a profit (Bitcoin value as of this writing is hovering near $6,610). But you do need that patience. You're not the only one who has decided to get into mining, and so many different miners and pools means this will take some time. But let's start from the beginning: what even is Bitcoin mining? You may have heard about people getting rich quick through mining, but the intended purpose of mining isn't just acquiring Bitcoins. Bitcoin mining is the process of validating transac Continue reading >>
How Bitcoin Mining Works - The Economist Explains
AS THE bitcoin price continues to fall, sceptics have started to wonder what will happen to the industry underpinning this digital “crypto-currency” . Around the world, hundreds of thousands of specialised computers have been built to create (or “mine”) bitcoins and, in the process, validate transactions and protect the system. How does bitcoin mining work? The aim of bitcoin—as envisaged by Satoshi Nakamoto, its elusive creator—is to provide a way to exchange tokens of value online without having to rely on centralised intermediaries, such as banks. Instead the necessary record-keeping is decentralised into a “blockchain”, an ever-expanding ledger that holds the transaction history of all bitcoins in circulation, and lives on the thousands of machines on the bitcoin network. But if there is no central authority, who decides which transactions are valid and should be added to the blockchain? And how is it possible to ensure that the system cannot be gamed, for example by spending the same bitcoin twice? The answer is mining. Every ten minutes or so mining computers collect a few hundred pending bitcoin transactions (a “block”) and turn them into a mathematical puzzle. The first miner to find the solution announces it to others on the network. The other miners then check whether the sender of the funds has the right to spend the money, and whether the solution to the puzzle is correct. If enough of them grant their approval, the block is cryptographically added to the ledger and the miners move on to the next set of transactions (hence the term “blockchain”). The miner who found the solution gets 25 bitcoins as a reward, but only after another 99 blocks have been added to the ledger. All this gives miners an incentive to participate in the syste Continue reading >>