What kind of bitcoin mining is there

Bitcoin mining

In Bitcoin mining, computers “mine” and calculate new BTC.

Unlike gold mining, Bitcoin mining offers a reward for useful services. The payment of the respective Bitcoin shares depends on the computing capacity made available.

In traditional fiat currency systems, governments or central banks print more money when needed. With Bitcoin, on the other hand, no money is printed. Rather, Bitcoin is mined itself or in the cloud (cloud mining). Around the world computers mine (calculate) bitcoins and compete with each other.

How does Bitcoin mining work?

He is paid for in Bitcoin (the Bitcoin transaction fee).

What is Bitcoin Cloud Mining?

A simple way to mine Bitcoins (BTC) or other digital currencies such as Ethereun (ETH) or Dash yourself is what is known as cloud mining.

With cloud mining, computing power is booked in a cloud server and, depending on the booked computing power, bitcoins or other digital currencies are distributed to the personal wallet on a daily basis.

Cloud mining is therefore particularly interesting for users who do not want to buy hardware themselves or who are simply too expensive to get started.

Bitcoin cloud mining can be done at Genesis Mining, for example.

Generate a hash

The ledger is a long list of all blocks. It is accordingly also called blockchain. The blockchain is used in Bitcoin mining in order to be able to trace all transactions at any point in time. Whenever a new block is created, it is added to the blockchain. The result is a seemingly endless list of all transactions ever made. The blockchain is visible to everyone. Accordingly, every user can see which transaction is being carried out. However, it is not possible to see who is carrying out this transaction. Bitcoin is thus transparent and pseudo-anonymous at the same time.

How can you ensure that the blockchain remains intact and is never tampered with?

This is where the miners come into play. When a block of transactions has been generated, miners run that block through a process. You take the information and apply a mathematical formula that converts the transaction into something much shorter, actually just a string of letters and numbers. This is also called a hash. This hash is kept in the block at the end of the blockchain.

Hashes have some interesting properties. It is quite easy to create a hash from the information in the Bitcoin block, but almost impossible to see what the hash was before. It should also be noted that each hash is unique: if even one character in the block is changed, the entire hash changes.

In order to generate a hash, the miners not only use the data of the transaction in the block, but also other additional data. Part of the data is the hash in the last block of the blockchain.

Since each hash of a block uses the hash of the previous block, a kind of wax seal is created. He confirms that the current block and the one before it is valid. If someone were to try to manipulate a transaction by changing the block that is already in the blockchain, they would also have to change the hash. If someone checks the authenticity of the block with the hashing function, one would immediately notice that the hash does not match the one in the blockchain. The block would immediately be exposed as a forgery.

The competition for bitcoins

The miners compete with each other to find new blocks. Every time someone successfully creates a hash, they currently receive 12.5 bitcoins. The blockchain gets an update through the hash and everyone knows about it. With this incentive system, the mining that keeps the transaction going is rewarded.

The problem is that it is very easy to create a hash from a collection of data. The Bitcoin network has to make it more difficult, otherwise everyone would hash hundreds of blocks per second and all bitcoins would be mined in a few hours. The Bitcoin protocol deliberately makes it more difficult for miners by introducing a so-called proof of work - the mining difficulty increases over time.

The Bitcoin network would not just accept every old hash. Rather, the block hash must have a certain appearance, such as a certain number of zeros at the beginning. There is no way of knowing what a hash looks like before it's not produced, as it changes its appearance completely with each piece of data set that is added.

Miners should not interfere in the transactions in the block. However, they have to modify the data they are using to create a new hash. They do this by using another piece of data. This data set is also called a nonce. It is used with the transaction to create a hash. If the hash does not find the desired format, the nonce is changed and the entire hash changes again.

Many attempts are usually necessary to find the right nonce. Therefore, the miners usually work in the same network at the same time. If the nonce is found, the bitcoins are distributed to all miners according to their performance. This is how miners ultimately earn bitcoins.

There are several ways to mine bitcoins. On the one hand, you can mine bitcoins from home with so-called ASIC miners.

Mine bitcoins yourself

Popular BitcoinMiners are the Antminers. The miners are simply connected to a router via LAN cable. These can then be configured via the web browser. No additional device or software is required as it is a standalone miner. The latest miners now also have an integrated power supply.

If you want to mine Bitcoin yourself from home, you need the latest Antminer.

The most efficient Bitcoin miner at the moment is the Antminer S19 with up to 110 TH / s. The miners are simply connected to a router via LAN cable. These can then be configured via the web browser. No additional device or software is required as it is a standalone miner. The latest miners now also have an integrated power supply.

Of course, mining can also be carried out on a larger scale and professionally. Miners.de e.g. offers a complete package. This is where the miners are securely hosted and managed and optimized by experts. In addition, customers benefit from lower electricity costs and space and noise savings compared to self-administration.

What is a mining pool?

Mining pools work on the idea of ​​collective mining. After all, if you dig alone, it takes much longer to find new blocks. It is almost hopeless, as the required computing capacity would be far too large. The so-called mining pools provide a remedy here. The required computing capacity of all users is bundled here. So you can find new blocks much faster. The remuneration in Bitcoin is divided among the individual users according to the computing capacity performed.

With the necessary hardware, you can now register with a reputable mining pool and collectively start Bitcoin mining there.

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