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Bitcoin Mining: What is it? What are the rewards and complications linked to the mining process?

3 November, 2020 Business

Bitcoin Mining: What is it?


Among all the popular cryptocurrencies, bitcoin is the trendiest and most demanded cryptocurrency. In 2009, Bitcoin was introduced by a mysterious entity named Satoshi Nakamoto. The reason that makes Bitcoin the most popular is its scarcity. Bitcoins are mined, and since its invention, 21 million bitcoins were invented. Bitcoin's popularity has made it circulate more in the market, and over 18 million bitcoins are in circulation as of 2020.


There are mainly three ways to obtain bitcoins: accepting them as a medium of exchange, mining new bitcoins, and buying bitcoins on a bitcoin exchange. Mining is the best way to get bitcoins, but now you must be thinking about earning bitcoin through mining? Mining is verifying the bitcoin transactions and recording them into public distributed ledger known as the Blockchain.


Blockchain technology makes sure that each transaction is confirmed and maintains the transparency of the bitcoin network. Keeping a record of every transaction distinguishes the verified transactions from re-spending money that has been spent already. The blockchain technology is a chain of plenty of blocks. Once a block is generated by mining, it is added to Blockchain. The bitcoins are mined by specialized computers than solve complicated mathematical algorithms to verify the transaction. You can use the 1g profit system to know more details of the mining process and follow them if you are interested.


What is a hash in Blockchain?

A complicated mathematical formula is applied to bitcoin transactions that turn into a short sequence of numbers and letters known as a hash. In simple words, the hash is a rigid length of the sequence of letters and digits created from information or data or whichever size. Hash doesn't need to consist of only information of transactions; it has some other data too. Especially, the hash of the preceding block of transactions is stored in Blockchain.


It is quite easy to generate a hash from the block's information, but it is impossible to estimate the data used by checking the hash sequence. Also, the hash sequence is unique, and if one digit or character is changed in a block of transactions, the hash sequence will get changed.


What are the Rewards?

The miners are the specialized computers that serve the entire bitcoin community. The most crucial work is done by miners of confirming the bitcoin transactions and ensuring that they are legitimate. The miners are given 10 minutes in which all miners compete using their special software to mine the block of transactions. Every 10 minutes, a new block is generated, which indicates that miners have created an accurate hash sequence. The miner who completes the transactions first, he gets rewards in the form of bitcoins.


The bitcoins are limited, and therefore when coins are mined, the difficulty level of solving the mathematical algorithm increases, and the reward decreases. Since its invention, the bitcoin reward was 50 bitcoins, and it is a protocol that the reward gets decreased every four years. In 2017, the reward was of 12.5 bitcoins for solving a block of transactions, and in the upcoming year 2021, the reward will get decreased to 6.25 bitcoins per block.


What are the complications?

The process of mining is done through a requisite 'Proof of Work.' The Proof of Work is a system that needs work from the service requester, and the work means the processing time taken by the computer. It is a bit tough to produce proof of work with a low prospect, so the trial and error method is used to generate a legitimate proof of work. In bitcoins, the hash is considered proof of work.


The mining gets complicated with every block of transactions, and to complicate the mining, the Bitcoin Difficulty is executed. The Bitcoin Difficulty is a process of estimating the difficulty of a new block compared to the preceding block. The difficulty is increased when there are new miners in the race, and the block of transactions that are liberated by deceitful miners who fail to meet the difficulty level are rejected from the race.


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