Everything you need to know about Bitcoin mining
where do bitcoins come from? With paper money, a government decides when to print and distribute money. bitcoin does not have a central government.
With bitcoin, miners use special software to solve math problems and receive a certain amount of bitcoins in return. this provides a smart way to issue the coin and also creates an incentive for more people to mine.
Reading: Is bitcoin mined
Bitcoin miners help keep the bitcoin network secure by approving transactions. mining is an important and integral part of bitcoin ensuring fairness while keeping the bitcoin network stable, safe and secure.
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bitcoin mining hardware comparison
Currently, based on (1) price per hash and (2) electrical efficiency, the best options for bitcoin mining are:
- overview: index
- comparison of mining hardware
- what is bitcoin mining?
- what is chain blocks?
- what is proof of work?
- what is bitcoin mining difficulty?
- the computationally difficult problem
- the bitcoin network difficulty metric
- the block reward
bitcoin mining is the process of adding transaction records to the public ledger of past bitcoin transactions or blockchain. This book of past transactions is called a blockchain, since it is a chain of blocks. the blockchain serves to confirm that transactions have been made to the rest of the network.
bitcoin nodes use the blockchain to distinguish legitimate bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
what is bitcoin mining?
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What is the Blockchain?
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Bitcoin mining is intentionally designed to be resource intensive and difficult so that the number of blocks found each day by miners remains constant. individual blocks must contain a proof of work to be considered valid. this proof of work is verified by other bitcoin nodes every time they receive a block. bitcoin uses the hashcash proof-of-work function.
The main purpose of mining is to allow bitcoin nodes to reach a secure and tamper resistant consensus. mining is also the mechanism used to introduce bitcoins into the system: miners are paid transaction fees as well as a “subsidy” of newly created coins.
This serves both to spread new coins in a decentralized way and to motivate people to provide security to the system.
Bitcoin mining is so named because it resembles mining other commodities: it takes effort and slowly makes the new currency available at a rate that resembles the rate at which it is mined from the ground. commodities like gold.
what is proof of work?
A proof of work is data that was difficult (expensive, time-consuming) to produce to satisfy certain requirements. it should be trivial to check whether the data satisfies these requirements.
Producing a proof of work can be a random process with low probability, so on average a lot of trial and error is required before a valid proof of work is generated. bitcoin uses hashcash proof of work.
what is the bitcoin mining difficulty?
the computationally difficult problem
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mining bitcoin in a block is difficult because the sha-256 hash of a block header must be less than or equal to the target for the network to accept the block.
This problem can be simplified for explanation purposes: the hash of a block must start with a certain number of zeros. the probability of calculating a hash that starts with many zeros is very low, so many attempts must be made. to generate a new hash each round, a nonce is incremented. see proof of work for more information.
the bitcoin network difficulty metric
the difficulty of the bitcoin mining network is the measure of how difficult it is to find a new block compared to how easy it can be. it is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks if everyone had been mining on this difficulty. this will produce, on average, one block every ten minutes.
As more miners join, the block creation rate will increase. as the block generation rate increases, the difficulty increases to compensate, which will cause the block generation rate to drop again. any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus have no value.
the block reward
When a block is discovered, the discoverer can award himself a certain number of bitcoins, which everyone on the network agrees to. currently this reward is 25 bitcoins; this value will be halved every 210,000 blocks. see controlled coin supply.
In addition, the miner receives the fees paid by users who send transactions. the fee is an incentive for the miner to include the transaction in their block. In the future, as the number of new bitcoin miners they can create per block decreases, fees will make up a much larger percentage of mining revenue.
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