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What is Bitcoin Mining?

What is Bitcoin Mining?

Normal currencies like the dollar, euro are used for trading, and millions of transactions are done on any currency note in the seconds, and governments issue millions of additional units of currencies in a year so that there should be no deficiency or shortage of currency notes. The same concept is applied in digital currencies like bitcoins, ethereum, ripple, litecoin, Dash, Zhash, but in a different manner.

Here we will discuss what is mining in the blockchain, what is bitcoin mining, how bitcoin mining works, and how to start mining bitcoins today.

DEFINITION

Mining is the process in blockchain in which miners verify the transactions of digital currencies (for example bitcoin) by solving the complex mathematical problems or equations. Problems contain cryptographic hash encryptions which need to be solved to find the correct hash value which will connect the new block of the transaction to the previous block, hence this is the way of making blockchain secure and safe.

Miners are powerful computer machines owned by thousands of individuals who get the new bitcoins as a reward for solving the equations and verifying the transactions in the blockchain. So this is how the new bitcoins are generated and issued. The same concept is applied in ethereum and mostly all digital currencies along with bitcoins.

There is a misunderstanding in many people that mining is the process of generating bitcoins but it is not. As defined above, it is the process of verifying the transactions by solving the equations, and in the result of that process or task, miners get bitcoins.

HOW BITCOIN MINING IS DONE

Miners use consensus algorithms to produce the Proof of Work (PoW) which determines the validation of transaction. Weneed to run SHA256 hash verification process to verify bitcoin transactions.

Initially, miners used to solve the math problems using normal computers. Later, they realized that graphics cards are more suitable and appropriate for solving these problems, as this was the case that graphics cards were performing much faster than the normal computers but they were using too much electricity and were generating heat. Then they used commercial products for bitcoin mining which included chips that were faster but still they were taking so much power and electricity.

Now, ASIC (Application-Specific Integrated Circuit) chips are specifically designed for bitcoin mining, and ASIC technology performs bitcoin mining much faster and uses less power. ASIC chips provide much better performance up to 100x faster than those older computers.

Ever since the bitcoin has released and started becoming popular, more and more people were getting interested to do bitcoin mining, and now there is a race and competition is going on nowadays as more and more people have joined the network of mining which made it even more difficult for individual persons to earn bitcoins and as soon as they solve the problem, the block gets added already. So miners have found a way of working together in pools (groups). Pools of miners solve problems faster than individual persons and each miner (in that pool) is rewarded the share of the bitcoin for the amount of work that he provides.

HOW TO START BITCOIN MINING

To start bitcoin mining, we first need to buy a bitcoin hardware which is ASIC (Application-Specific Integrated Circuit) designed especially for bitcoin mining. Once we have bought the hardware, we’ll then download and install the bitcoin mining software. There are several bitcoin mining applications but BFGMiner and CGMiner are the two popular command line programs for bitcoin mining. If we want to work with any GUI (Graphical User Interface) software, we can use EasyMiner.

As mentioned above, doing bitcoin mining individually in current times is a bit difficult tasks, and individuals work hard for a year and they won’t be able to earn bitcoins because of the competition going between the miners. So the best way to start bitcoin mining is to join any pool (a group of miners). Below are the best pools to join:

CK Pool

BitMiner

Slush Pool

Eligius

SETUP BITCOIN WALLET

After joining the pool, next step is to setup bitcoin wallet to get the bitcoins which we have mined. As we keep normal currencies in our physical wallets, the same concept is applied here in digital currencies, as digital currencies are not tangible assets but these are digital assets so we need digital wallets to store them. Copay is the best bitcoin wallet and also it works on several operating systems.

Bitcoin Wallet is basically the software program in which bitcoins are stored with the security of private and public keys. Each wallet contains several private keys, and all bitcoins which are stored in a wallet, have their private key which is a secret number used to prove the ownership of the person for that bitcoin and private keys are also saved in wallets. We share our public keys with others so that they can send us bitcoins.

As bitcoins are not stored elsewhere except wallets and several digital currencies provide their own digital wallet, but some digital currencies do not provide, so they are stored in third-party wallets. There are four types of digital wallets: desktop (application), mobile, web and hardware.

Written by Alessandro Civati
For Lirax Blockchain & AI Platform

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