What is Bitcoin Mining and How Does It Work – Explained With Infographics
One of the greatest features of bitcoin is its decentralization. However, there are no regulatory agencies, no controls or any central government regulating it. This causes a lot of people concern. There are many opponents of Bitcoin who say that the lack of regulatory oversight will cause problems. But the truth is, in a way, every person involved in the blockchain is a regulatory authority.
The people who work to validate each part of the blockchain are rewarded with bitcoin for their efforts in validating the transactions. These people are called miners. This article will provide an explanation of what mining is, how it works and will give a brief overview of the entire mining process and some of the technology that the system is based on.
The process of mining was designed by Satoshi Nakamoto, the creator of Bitcoins, in such a manner that security is increased to incredible levels. As a matter of fact, the only way to commit any kind of fraud on the blockchain is to subvert 51% of the people who are part of the blockchain. Due to the sheer computational power required to break the efforts of the miners, Bitcoin encryption is widely regarded as the best in the world.
How Does Bitcoin Mining Work?
Bitcoin mining is the process by which Bitcoin transactions are validated. Earning Bitcoin is done through the process of mining, and mining is an integral part of blockchain technology. When a transaction is made, it goes into a “block”, which records the most recent Bitcoin transactions that have not yet entered any prior blocks. It acts as a ledger, or rather, a page of a ledger. Now one of the security measures, as noted above, is encryption. So the task falls to the network to encrypt each block. But when the block is encrypted, there is only one key to decrypt it. In order to generate this key, a mathematical problem is posed to the network. Everybody in the network then dedicates computing power to solving this problem and completing the encryption process. The first person to solve it and find the key earns a set number of bitcoins as a reward for devoting computing power to this problem. This entire process is called mining.
What equipment is needed to mine?
In order to mine bitcoins, you need a mining rig. This can be as simple as a Graphics Processing Unit (GPU) miner, or as high-end as an application-specific integrated chip style miner.
The high-end miners can cost thousands of dollars, with specially made racks to cool the cards while in use. However, home users can also cobble together powerful mining rigs by plugging several graphics cards together in parallel and using the resulting processor to mine bitcoins. Professional miners have different requirements.
Many of them even rent large warehouses and stock them with mining rigs. Apart from this, all you need to mine is a bitcoin wallet and an internet connection. You can read the detailed guide to start Bitcoin Mining:- How to mine bitcoins on your own
These are the basics of mining. It is an integral part of the blockchain, and miners serve a vital role in the cryptocurrency ecosystem. But due to the decentralized nature of bitcoin, anybody can start mining whenever they wish. It is open to all! You can read this advance guide to learn the step by step method to mine Bitcoin: