It is no surprise that you have come across the term ‘Bitcoin Mining’. But the fact that you don’t understand anything about it is equally not surprising too. And even though the year 2018 has seen Bitcoins falling severely unlike major market expectations, still it is a hot property in News World. You can see hundreds of articles dedicated to Bitcoin every single day. So why do we fall behind? We won’t. I am writing this article to share some awareness of Bitcoin Mining with you.
What is Bitcoin?
Before we start, we must actually understand what Bitcoin is? In simple words, it is an open-source, decentralized currency. No country or central bank can stamp its authority on it. It can only be regulated by the market itself. Being decentralized, it allows transactions all over the world. And since it is unregulated, the transaction processing is faster than any other form of regulated currency.
For an in-depth understanding of Bitcoins, you can read Everything you need to know about Bitcoins
What is Bitcoin Mining?
Bitcoin has to be mined in order to have it. Miners use their powerful computing devices to solve complex mathematical problems using some specific software. When they successfully solve the problem which no one had solved before him, he is gifted a Bitcoin. Bitcoin Mining is the process of digging digital earth in order to extract Bitcoins.
Why is Bitcoin Mining necessary?
As mentioned above, Bitcoin doesn’t operate like any traditional currency. It rather operates on the basis of the public ledger system. There are thousands of miners all over the world. While digging, there are chances that they may claim the same Bitcoin twice. In order to prevent it, a seal of approval is required for the miner to ascertain that he has indeed mined a Bitcoin.
If we don’t mine it, we won’t get any more Bitcoins available to be mined. It has been assumed that there are 21 million Bitcoins, in total, out of which around 16.8 million have already been extracted. Bitcoin Mining is also necessary to allow more coins for circulation. This will allow Bitcoin to be called a functional currency.
How Bitcoin Mining works?
Bitcoin Mining essentially consists of two parts – first, the miner must ensure that he has verified 1 MB (Megabyte) of transactions. This can range from a single transaction to thousands of them. It all depends upon the data each transaction has in store. The second part is the more difficult one, they have to produce a ‘Hash’ or a ‘Proof of Work’.
It simply means that they must solve a complex mathematical problem and come up with a 64-digit hexadecimal number, referred to as Hash which must be equal or less than the targeted hash. In the initial years, the problems were quite easy to solve. The difficulty level of the last solved problem was 7,184,404,942,701. This means that the available hash target was 1 in 7,184,404,942,701 i.e. 1 in 7 trillion.
You need to solve such a complex problem to earn a Bitcoin. And not only that, you must be the first one to do it too. The above-mentioned level is revamped every 2016 blocks or approximately every 2 weeks. And since the number of miners is constantly on a rise, the problem will tend to get tougher with time. If the opposite happens, the problems will also ease out gradually.
What is Blockchain?
In complicated terms, a Blockchain is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. In simple terms, a Blockchain is a list of records, each of which is called blocks. These blocks are linked using cryptography and contain a cryptographic hash of the last block, a timestamp and the transaction data. It is considered very secure as it cannot be modified.
To know in detail about Blockchain you can read Everything you Need to know about Blockchain and if you are interested in building the blockchain then you can take this online tutorial teaching you to build Blockchain by using Python.
What are the devices used to mine?
Initially, normal PCs were used for mining purposes. Mining Bitcoin depends on how strong your guesswork is and how fast your device can process information and produce hashes. With the passing of time, miners began realizing the benefits of using graphics card rather than normal computers for mining. So in 2013, ASICs (Application Specific Integrated Circuits) was developed specifically for mining. Since then ASICs are being used for mining.
How can individual miners compete with the pool of miners?
Initially, it was very easy to mine Bitcoin. But as per current figures, there is only 1 Bitcoin available for 7,184,404,942,701 chances which makes it very tough for individual miners to survive. Further, the cost of mining is so high, that it more often than not, exceed the benefits gained. So people with huge funds can only survive. It is safe to say that it is almost impossible for individuals to survive here.
The Future of Mining
It should not be unfair to say that the miners have been unethical in this case. Bitcoin was developed keeping in mind that even the basic computer should be able to mine it. But ASICs made it almost impossible to continue using general computers for mining. And if the difficulty level for the present block is not hard enough, it is going to get harder with every passing two weeks.
At present, every block that is being mined offers around 12 Bitcoins and it will reduce as more and more blocks are mined. Plus the rate at which electricity is being consumed to mine is threatening. Even though it may seem very fruitful, the net reward from earning will gradually fall. And since 16.8 million of the 21 million possible Bitcoins have already been mined, we can safely assume that at the current rates, all the Bitcoins will be mined by the end of the 22nd Century.
If it continues its operations until then, it will survive only through circulation. Mining cannot be continued after that period. We hope that the miners find a more amicable solution to mine rather than consuming so much energy and resources. It is a constant threat to the existence of human beings and needs to be curtailed as soon as possible.
In the meantime, if you are intrigued by the concepts of cryptocurrencies and blockchain then explore all its concepts by opting Blockchain and Cryptocurrency Essentials.