• Posted in: Home
• 88
• Author: admin

How Does Bitcoin Mining Work? Aside from the coins minted via the. This is probably not the most efficient way to mine, and as you can guess, many miners are.

Cryptocurrency mining is painstaking, expensive, and only sporadically rewarding. Nonetheless, mining has a magnetic draw for many investors interested in cryptocurrency. This may be because entrepreneurial types see mining as pennies from heaven, like California gold prospectors in 1848.

And if you are technologically inclined, why not do it? Well, before you invest the time and equipment, read this explainer to see whether mining is really for you. We will focus primarily on Bitcoin. (Related: and our helpful infographic, ) Why should I mine?

By mining, you can earn cryptocurrency without having to put down money for it. That said, you certainly don't have to be a miner to own crypto. You can also (USD, EUR, JPY, etc); you can trade it on an exchange like using other crypto (example: Using Ethereum or NEO to buy Bitcoin); you even can earn it by playing video games or by publishing blogposts on platforms that pay its users in crypto. An example of the latter is, which is kind of like Medium except that users can reward bloggers by paying them in a proprietary cryptocurrency called Steem. Steem can then be traded elsewhere for Bitcoin. In addition to lining the pockets of miners, mining serves a second and vital purpose: It is the only way to release new cryptocurrency into circulation.

In other words, miners are basically 'minting' currency. For example, as of the time of writing this piece, there were about 16 million Bitcoin in circulation. Aside from the coins minted via the genesis block (the very first block created by Bitcoin founder Satoshi Nakamoto himself), every single one of those Bitcoin came into being because of miners. In the absence of miners, Bitcoin would still exist and be usable, but there would never be any additional Bitcoin.

There will come a time when Bitcoin mining ends; per the Bitcoin Protocol, the number of Bitcoin will be capped at 21 million. (Related reading: ) How much can a miner earn from mining Bitcoin? Bitcoin are mined in units called 'blocks.' As of the time of writing, the reward for completing a block is 12.5 Bitcoin. At today's price of about $5000 per Bitcoin, this means you'd earn (12.5 x 5000)=$62,500. When Bitcoin was first mined in 2009, mining one block would earn you 50 BTC.

In 2012, this was halved to 25 BTC. In 2016, this was halved to the current level of 12.5 BTC. Most Efficient Way To Mine Dash DASH on this page. In 2020 or so, the reward size will be halved again to 6.25 BTC. If you want to keep track of precisely when these halvings will occur, you can consult the, which updates this information in real time.

(Source: Bitcoinclock.com) How many blocks have been mined so far? A number of sites, including, will give you that information in real time. At the time of writing, we are at block #. What are miners doing that's so important that they get free Bitcoin? Miners are getting paid for their work as auditors. They are doing the work of verifying previous Bitcoin transactions.

This convention is meant to keep Bitcoin users honest, and was conceived by Bitcoin's founder,. By verifying transactions, miners are helping to prevent the ' problem.' Double spending means, as the name suggests, that a Bitcoin user is illicitly spending the same money twice. With physical currency, this isn't an issue: Once you hand someone a greenback $20 bill to buy a bottle of vodka, you no longer have it, so there's no danger you could use that same $20 to buy lotto tickets next door.

With digital currency, however, as the Investopedia dictionary explains, 'there is a risk that the holder could make a copy of the digital token and send it to a merchant or another party while retaining the original.' Let's say you had one legit $20 and one really good photocopy of that same $20. If someone were to try to spend both the real bill and the fake one, someone who took the trouble of looking at both of the bills' serial numbers would see that they were the same number, and thus one of them had to be false. What a Bitcoin miner does is analogous to that--they check transactions to make sure that users have not illegitimately tried to spend the same Bitcoin twice. This isn't a perfect analogy--we'll explain in more detail below. Once a miner has verified 1 MB (megabyte) worth of Bitcoin transactions, they are eligible to win the 12.5 BTC.

The 1 MB limit was set by Satoshi Nakamoto, and is a matter of controversy, as some miners believe the block size should be increased to accommodate more data. Note that I said that verifying 1 MB worth of transactions makes a miner eligible to earn Bitcoin--not everyone who verifies transactions will get paid out. 1MB of transactions can theoretically be as small as 1 transaction (though this is not at all common) or several thousand. It depends on how much data the transactions take up. So after all that work of verifying transactions, I might still not get any Bitcoin for it?

That is correct. Fastest Video Card For Nexus NXS Mining. In order to earn Bitcoin, you need to meet two conditions. One is a matter of effort, one is a matter of luck. 1) You have to verify ~1MB worth of transactions. This is the easy part. 2) You have to be the first miner to arrive at the right answer to a numeric problem. This process is also known as a.

What do you mean, 'the right answer to a numeric problem'? The good news: No advanced math or computation is involved. You may have heard that miners are solving difficult mathematical problems--that's not true at all. What they're actually doing is trying to be the first miner to come up with a 64-digit hexadecimal number (a ') that is less than or equal to the target hash.

It's basically guess work. The bad news: Because it's guesswork, you need a lot of computing power in order to get there first. To mine successfully, you need to have a high 'hash rate,' which is measured in terms of megahashes per second (MH/s), gigahashes per second (GH/s), and terahashes per second (TH/s). That is a great many hashes.

If you want to estimate how much Bitcoin you could mine with your mining rig's hash rate, the site offers a helpful calculator. What equipment do I need to mine? Either a GPU (graphics processing unit) miner or an application-specific integrated circuit (ASIC) miner. These can run from $500 to the tens of thousands. Some miners--particularly Ethereum miners--buy individual graphics cards as a low-cost way to cobble together mining operations. The photo below is a makeshift, home-made mining machine. The graphics cards are those rectangular blocks with whirring circles. Note the sandwich twist-ties holding the graphics cards to the metal pole. This is probably not the most efficient way to mine, and as you can guess, many miners are in it as much for the fun and challenge as for the money. (Source: Shutterstock) The ELI5 ('Explain It Like I'm Five') version of what Bitcoin miners do Example: I tell three friends that I'm thinking of a number between 1 and 100, and I write that number on a piece of paper and seal it in an envelope.

My friends don't have to guess the exact number, they just have to be the first person to guess any number that is less than or equal to the number I am thinking of. And there is no limit to how many guesses they get.

Let's say I'm thinking of the number 19. If Friend A guesses 21, they lose because 21>19. If Friend B guesses 16 and Friend C guesses 12, then they've both theoretically arrived at viable answers, because 16.