Basics of Bitcoin Mining
Proof of Work
Miners use Proof of Work (PoW) encryption to make sure the accuracy and security of every bitcoin transaction. Every transaction creates multiple hash outputs, which are assigned a Transaction Identifier (TXID). Transactions are recorded and grouped into “blocks” by bitcoin Miners. Each and every bitcoin transaction is recorded in a public ledger.
The TX is then sent to the node or “Blockchain” to verify the sender’s wallet balance. With every transaction being placed, Bitcoin’s node verifies the accuracy of the blockchain. By tracking every transaction made and using advanced encryption for validating and securing every transaction, the PoW function is impossible to hack.
Mining is also the mechanism used to introduce bitcoins into the system; with Bitcoin, money isn’t printed at all – it is discovered by computers around the world solving complicated mathematical puzzles in an effort the validate and encrypt every Bitcoin transfer. Each time a block is solved, a proportional amount of new bitcoins are made and rewarded to the miner or pool who discovered it. In a pool, miners are rewarded for each successful “share” submitted to the blockchain.
Legality of Mining
Bitcoin uses Uses peer-to-peer technology eliminating the need for any central authority or bank. Conventional money systems and governments commonly print extra money when they think its necessary. No government or entity owns Bitcoin, nor can they ever control its output. In North America, Russia, China, and most of Western Europe bitcoin mining totally legal. Yet, In a few places, mining, as well as the possession and use of bitcoin is still illegal. If unsure you should check with the local authorities where you live. You can also see the *Legality of bitcoin by country or territory* on Wikipedia for legal news and updates.
New devices are joining the Bitcoin network every day. The increase in mining hash power effectively increases the difficulty of mining. As the difficulty of mining increases and new each block discovered the use of better hardware and more electricity consumption is required.
The increased cost of mining results in the value of each coin rises as well. The amount of Bitcoins created per share starts at and is split around every four years. This event is called the blockhalf and occurs every 210,000 blocks. From beginning to end of the blockhalf, the coin reward will decrease from 12.5 to 6.25 coins. Approximately 144 blocks are generated per day, One every 10 minutes on average.
It is not recommended to mine with your home computer. You will need to invest in mining hardware such an ASIC or mining rig to profit from mining bitcoin. ASIC devices mine at unprecedented rates while consuming much less power than FPGA or GPU mining rigs. Before you begin mining you will need to download a full copy of the blockchain, create a bitcoin wallet, find a reliable pool to join, and install bitcoin mining software.
Another way of mining bitcoin is cloud mining. Cloud mining is an alternative option for those who live in a place with expensive electricity rates or are otherwise unable to afford expensive mining hardware. Another way of obtaining bitcoin is to buy it from an exchange. An exchange is basically a cryptocurrency stock market.
Even the Basics of Bitcoin can be confusing at first for beginners. To help you along we wrote: