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Thursday, 16 June 2022

What Is a Bit coin mining: How Does it Work, Proof of Work, Mining Hardware and More


What Is a Bit coin mining: How Does it Work, Proof of Work, Mining Hardware and More


Table of Contents

What Is Bit coin?

What Is Block chain?

3 Concepts of Block chain

What Is Bit coin mining in Block chain?

Bit coin Profit and the Bit coin Mining Profitability

View More

As of late March 2022, Bit coin value hit the clocked in at $43,394.80 on the exchange market. This value is an indication of the good tidings for the crypto currency. Over the years, there has been such a growing interest in the Bit coin currency that its value has grown to resemble that of the gold.  

The future is promising for the Bit coin miners and the enthusiasts, and it’s a potentially rewarding the enterprise for anyone who wants to give it a go. However, let’s first take some time to learn the basics about the Bit coin mining.  

In brief

·         The block chain ledger keeps growing as the transactions that have taken place in the network are constantly added to it. 

·         Transactions in the block chain network are grouped into the blocks that are linked together to form a chain of the blocks, hence block chain. 

·         Block chain transactions are stored in the chronological order marked by the timestamps and the hash functions.  

·         By this virtue, the records stored in the block chain network are permanent and immutable. 

There are three ways through which bit coin miners can acquire the bit coins. These are:

·         Purchasing the bit coins on the exchange market 

·         Accepting the bit coin in exchange for the goods and services 

·         Mining new bit coins

Of these three, the bit coin mining is perhaps the most exciting option as it sends miners on a path to the discovery. There is a caveat. Bit coin mining can be a quite taxing as it requires a very high computing power to solve the complex mathematical equations to verify the transactions and add them to the block chain digital ledger.

Simplilearn’s video tutorial explains the process of the Bit coin mining and the advantages of the Bit coin over the traditional fiat currencies.

What Is Bit coin?

Bit coin is the first decentralized digital currency that allows the peer-to-peer transfers without any intermediaries such as the banks, governments, agents, or brokers, using the underlying technology of the block chain. Anyone around the world on the network can transfer the Bit coins to someone else on the network regardless of the geographic location; you just need to open an account on the Bit coin network and have some Bit coins in it, and then you can transfer those Bit coins. How do you get the Bit coins in your account? You can either purchase them online or can mine them.

Bit coin can be used for the online purchases and or as an investment instrument. Primarily it is used to buy the goods and services.

Bit coin Advantages

Compared to the traditional fiat currencies, assets can be transferred faster on the bit coin network. The system also has lower transaction fees, because it is decentralized and there are no intermediaries, and it is cryptographically secure—the identities of the sender and the receiver are kept hidden, and it is an impossible to counterfeit or hack the transactions. Plus, all the information is also available on a public ledger, so anyone can view the transactions.

What Is Block chain?

As mentioned, block chain is the underlying technology of the bit coin. Block chain is a public distributed ledger in which the transactions are recorded in a chronological order. Any record or transaction added to the block chain cannot be modified or altered, meaning transactions are safe from the hacking. A block is the smallest unit of the block chain, and it is a container that holds all the transaction details. The block has four fields, or primary attributes:

1.      Previous hash: This is an attribute that stores the value of the hash of the previous block, and that's how the blocks are linked to one another.

2.      Data: This is the aggregated set of the transactions included in this block—the set of the transactions that were mined and validated and included in the block.

3.      Nonce: In a “proof of work” consensus algorithm, which a bit coin uses, the nonce is a random value used to vary the output of the hash value. Every block is supposed to generate the hash value, and the nonce is the parameter that is used to generate that hash value. The proof of a work is the process of transaction verification done in the block chain.

4.      Hash: This is the value obtained by passing the previous hash value, the data and the nonce through the SHA-256 algorithm; it is the digital signature of the block.

SHA-256 is a cryptographic hash algorithm that produces a unique 256-bit alphanumeric hash value for the any given input, and that is the unique feature of this cryptographic algorithm: Whatever the input you give, it will always produce a 256-bit hash.

3 Concepts of Block chain

To understand the bit coin mining, you have to first understand the three major concepts of the block chain.

1.      Public distributed ledger: A distributed ledger is a record of all the transactions maintained in the block chain network across the globe. In the network, the validation of the transactions is done by the bit coin users.

2.      SHA-256: Block chain prevents unauthorized access by using a hash function called SHA-256 to ensure that the blocks are kept secure. They are digitally signed. Their hash value which is, once generated cannot be altered. SHA-256 takes an input string of any size and returns a fixed 256-bit of output, and it is a one-way function—you cannot derive the reverse of the input but reverse it fully from the output (what you have generated).

3.       Proof of work: In the block chain mining, miners validate transactions by solving a difficult mathematical puzzle called proof of work. To do that, the primary objective of the miner is to determine in  the nonce value, and that nonce value is the mathematical puzzle that the miners are required to solve and to get generate a hash that is less than the target defined by the network for a particular block.

What Is Bit coin Mining in Block chain?

Bit coin mining is the process by which the Bit coin transactions are validated digitally on the Bit coin network and added to the block chain ledger. It is done by solving the complex cryptographic hash puzzles to verify the blocks of transactions that are updated on the decentralized block chain ledger. Solving these puzzles requires a powerful computing power and sophisticated equipment. In return, the miners are rewarded with the Bit coin, which is then released into a circulation hence the name is Bit coin mining.

Bit coin Profit and the Bit coin Mining Profitability

Bit coin Profit is an automated crypto robot that helps to trade the Bit coins and the other crypto currencies to earn profit. It uses an AI algorithm to identify the trading opportunities in the crypto market that can automatically close and open your trade, saving your time and the manual intervention during trading. It claims that around 85% of its trades produce profits in the normal market conditions. However, the technical knowledge is also required to calculate the profit generated through the Bit coin mining process. 

Talking about the actual Bit coin profit – and the real money making - it depends upon the cost of the AISC hardware, electricity consumption, and the effectiveness of the mining software. Bit coin Mining profitability has decreased in recent times compared to the previous years because of the rise in electricity costs, costlier hardware, difficulty in mining due to an increase in the competition, and a decrease in the Bit coin prices. Earlier, Bit coin Mining was initiated using CPUs and easy AI Algorithms, making it profitable and less costly.

Bit coin vs. Traditional Currencies

While both the Bit coin and the traditional currency are similar in that both are a store of the value, they differ in many ways. First things first, Bit coin is the first and a most recognized crypto currency - a digital currency that is secured by the cryptography. Traditional currency, also referred to as fiat money, is a government-issued and a regulated currency

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