This article very first appeared te print edition Four.1 of yBitcoin. Click here to see the total punt. Click here to order your copy.
By Aaron van Wirdum
Bitcoin mining is not something average users indeed need to concern themselves with too much. If the toneelpodium works spil intended, users should see their transactions confirmed and need not worry about how.
And itвЂ™s unfortunate that so many users are unaware of the process that produces bitcoins, spil mining is one of the most ingenious and intriguing aspects of the system. It is, te many ways, BitcoinвЂ™s backbone, at the same time solving the вЂњdouble spendingвЂќ problem that could mean the same bitcoins are spent twice, making the underlying blockchain immutable and bringing fresh coins into circulation.
Indeed, Bitcoin mining embodies several of the beautifully balanced incentives that make Bitcoin such a revolutionary system.
The Role of a Miner
Bitcoin mining is done by вЂ” who else? вЂ” Bitcoin miners.
Theoretically, anyone can become a Bitcoin miner. Like many other Bitcoin users, miners verify fresh transactions and fresh blocks and forward thesis to connected Bitcoin knots. They are part of the peer-to-peer network just like anyone else, and, from a network perspective, there isnвЂ™t anything to identify them spil miners.
But miners take on an extra task within the network. They use the transactions they receive to attempt and вЂњmineвЂќ fresh blocks themselves. This system has them serving an significant function for the network: If two conflicting transactions exist on the network because someone attempts to cheat and spend the same bitcoin twice, the miner picks which of thesis transactions is confirmed and includes it te a block of verified gegevens. The conflicting transaction is then rejected from the network. Spil such, mining solves BitcoinвЂ™s dual spend problem.
How It Works
This mining of fresh blocks is a somewhat ingewikkeld mathematical process, the details of which are beyond the scope of a primer guide. But ter a simplified metaphor, it can be thought of spil a unique type of lottery. Miners randomly вЂњguessвЂќ what the next block could look like. If they guess correctly, their block is accepted by the network. If they guess incorrectly, they can guess again and spil often spil they want.
However, each guess requires a lil’ bit of computing, or hash, power to make. And because Bitcoin miners effectively challenge against each other to be the very first to find a fresh block, many attempt to guess spil rapid and spil often spil they can. This has naturally evolved into a sort of arms wedloop overheen the years. Miners have increasingly optimized their computers to churn out a loterijlot of hash power and spend a lotsbestemming of computing energy doing so.
This energy consumption is why Bitcoin mining is sometimes viewed spil wasteful. But te actuality, this вЂњwasted energyвЂќ offers the 2nd superb benefit to the Bitcoin network: it makes the blockchain tamper-resistant and immutable.
Spil a key property of the Bitcoin system, transactions that have bot done ter the past are practically unlikely to undo. The only way for an attacker to potentially switch sides an old transaction is to rebuild the entire blockchain that has bot established since that transaction happened. This would also require the attacker to go through the entire вЂњguessing gameвЂќ and mine a entire fresh series of blocks from scrape.
However, all of this вЂњguessingвЂќ would require at least spil much energy spil has bot invested by all of the miners since that transaction took place and potentially much more ter order to overtake the original chain. Depending on how much hash power an attacker controls, this is either unlikely or very expensive. Because this is unlikely or prohibitively expensive, itвЂ™s safe to trust that older transactions will indeed not be reversed, making the Bitcoin blockchain relatively immutable.
Of course, miners donвЂ™t invest all of this energy into finding blocks for charity. Each fresh Bitcoin block includes one special transaction. This transaction pays the miner te brand-new bitcoins that didnвЂ™t exist before, spil well spil transaction fees.
And that is the third good benefit of Bitcoin mining: itвЂ™s how fresh bitcoins come into circulation, without the need of a central issuer.
Putting On a Hard Hat
So, now that you understand what mining is, perhaps you want to become a miner and earn some fresh bitcoins yourself. ThatвЂ™s possible вЂ” but itвЂ™s not effortless.
Back ter the early days of Bitcoin, when the currency wasgoed hardly worth anything at all, anyone could mine bitcoins, even using a laptop laptop. But this quickly switched when bitcoin gained real monetary value. Once miners realized that graphics cards could be dedicated to the task more efficiently, specialized mining farms emerged across 2010 and 2011. And since 2012 and 2013, Bitcoin mining has professionalized even further, spil specialized chips and machines вЂ” known spil вЂњASIC minersвЂќ вЂ” came to market. If you want to mine profitably, you will most likely need one of thesis.
It should also be noted that most Bitcoin mining today happens through mining pools. Instead of individual miners taking part ter the peer-to-peer network, most of them actually bundle their hash power together through such a mining pool and share any prizes they receive. This smoothes out the вЂњluck factorвЂќ inherent te mining, so no one has to go without prize for months or years at a time.
And last but not least, you will very likely need relatively cheap (or free) energy, otherwise you are likely to spend more on your electro-stimulation bill than you will everzwijn earn ter prizes. Larger operations may also require a welgevoeglijk cooling system or a cold climate. And some basic technical abilities to set the operation up and maintain it will come te handy, too.
All of this is doable if you want to waterput ter the time, money and effort, and if you have access to the right resources it could even earn you a nice profit. But keep te mind that you will be contesting te a very professionalized industry. Bitcoin mining is not free money.