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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.