Join over 94,000 students, learn all you need to know about Bitcoin. Avalon asic bitcoin btc mining computer rig miner Email a Day, 7 Days in a Row. What Is Bitcoin Mining and is it Profitable in 2018? The following post will give you an in depth understanding of what Bitcoin mining is, how it works and most importantly is it still profitable today?
I’ll do my best to keep it simple, as always. Why do we even need Bitcoin mining? Bitcoin is a decentralized alternative to the banking system. This means that the system can operate and transfer funds from one account to the other without any central authority. When you have a trusted central authority transferring money is easy.
50 from your account and add it to someone else’s account. In this case, the bank has all the power, since he is the only one who is allowed to update the ledger that holds the balances of everyone the system. But how do you create a system that has a decentralized ledger? How do you give someone the ability to update the ledger but don’t give them too much power so that they will become corrupt or negligent in their work?
Who Wants to Be a Banker? How Bitcoin mining works In short, anyone who wants to participate in updating the ledger of Bitcoin transactions, known as the blockchain, can do so. All you need is guess a random number that solves an equation generated by the system. Of course this guessing is all done by your computer. The more powerful of a computer you have, the more guesses you can make in a second, thus increasing your chances of winning this game.
Here’s a more detailed breakdown of the mining process: : 1. Once your miner makes the right guess, your mining program groups a certain amount of pending transactions together into a block of transactions. This block represents your moment of glory as the temporary banker of Bitcoin who gets to update the Bitcoin transaction ledger known as the blockchain. The block you’ve created, along with your solution is sent to the whole network so other computers can validate it. It’s a bit similar to a rubix cube: The solution is very hard to achieve but very easy to validate. Each computer that validated your solution updates his copy of the Bitcoin transaction ledger, with the transactions you chose to include in the next block. Additionally, you get paid any transaction fees that were attached to the transactions you inserted into the next block.
All the transactions in the block you’ve just entered are now confirmed by the Bitcoin network and are virtually irreversible. Here’s a two minute video showing the process of blocks and confirmations. So that’s Bitcoin mining in a nutshell. But if you think about it, the mining part is just a by product of the transaction confirmation process. So the name is a bit misleading, since the main goal of mining is to find a way to maintain a ledger in a decentralized manner. As you can imagine, since mining is based on a form of guessing, each time a different miner will guess the number and be granted the right to update the blockchain. Of course the miners with more computing power will guess more often, but due to probability rules it is highly unlikely the same miner will guess it everytime.
Satoshi Nakamoto, the guy who invented Bitcoin, crafted the rules for mining in a way that the more mining power the network has, the harder it is to guess the answer to the mining math problem. So the difficulty of the mining process is actually self adjusting to the accumulated mining power the network possesses. If many of them drop off, it will get easier. This is known as the mining difficulty. Why on earth did Satoshi do this? Well, he wanted to create a steady flow of new Bitcoins to the system.