Coding compiler – What is Bitcoin Mining? Bitcoin mining is a process that provides processing power to process, secure and synchronize all users on the network. The Mining is a kind of decentralized Bitcoin data center with miners from all over the world. This process is called mining analogous to gold mining. Unlike gold mining, bitcoin mining offers a reward for useful services. The payment of the respective Bitcoin shares depends on the available computing capacity.
What is Bitcoin Mining?
In traditional Fiat currency systems, governments and central banks spend more and more money when needed. With Bitcoin, however, no money is printed. Rather, Bitcoin has mined itself or in the cloud (cloud mining). Around the globe, computers compute (compute) bitcoins and compete with each other.
- How does Bitcoin mining work?
- How does cloud mining work?
- Which bitcoin mining hardware is needed?
- Which software is recommended?
- Which Bitcoin mining pools are there?
How does Bitcoin mining work?
Around the clock, people are transferring bitcoins over the Bitcoin network. The Bitcoin network handles these transactions by collecting all the transactions of a given period of time and putting them together in a list – the so-called block. It is the job of the miner or screamer to confirm these transactions and enter them in an account book. He is rewarded for this in Bitcoin (the Bitcoin transaction fee).
Create a hash
The account book is a long list of all the blocks. It is also called Blockchain accordingly. The blockchain is used in bitcoin mining to track all transactions at all times. Whenever a new block is created, it is added to the blockchain. This results in a seemingly endless list of all transactions ever made. The blockchain is visible to everyone.
Accordingly, each user can see which transaction is being performed. On the other hand, it is not clear who will carry out this transaction. Thus Bitcoin is transparent and (pseudo-) anonymous at the same time.
How to make sure the blockchain stays intact and never gets manipulated? At this point, the miners come into play. When a block of transactions has been generated, miners let this block go through a process.
They take the information and apply a mathematical formula that transforms the transaction into something much shorter, actually just a string of letters and numbers. This is also called hash. This hash is kept in the block at the end of the blockchain.
Hashes have some interesting features. It’s pretty easy to make a hash from the bitcoin block information, but it’s almost impossible to see what the hash was before. It should also be noted that each hash is unique: if only one character in the block is changed, the entire hash changes.
To create 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, it creates a kind of wax seal. He confirms that the current block and the previous one are valid. If someone tried to manipulate a transaction by changing the block that already resides in the blockchain, that one would have to change the hash as well.
If someone checks the authenticity of the block with the hashing function, one would notice directly that the hash does not match that in the blockchain. The block would be unmasked immediately as a fake.
The competition for the bitcoins
The miners compete with each other in their search for new blocks. Every time someone successfully creates a hash, they currently receive 12.5 bitcoins. The blockchain receives an update through the hash and everyone learns about it. This incentive system will reward the mining that sustains the transaction processing.
The problem is that creating a hash from a data collection is very easy. The Bitcoin network must make it more difficult, otherwise everyone would hasten hundreds of blocks per second and all bitcoins would be mined in a few hours. The Bitcoin protocol purposely makes it more difficult for miners to introduce a so-called work certificate – the mining difficulty increases over time.
The Bitcoin network would not just accept any old hash. Rather, the block hash must have a specific look, such as a certain number of zeroes at the beginning. There is no way to know what a hash looks like before it has been produced, as it completely changes its appearance with every piece of data that is added.
Miners should not interfere with the transactions in the block. However, they must change the data they use to create a new hash. They do this by using another piece of data again. This record is also called 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. Mostly many attempts are necessary to find the right nonce. Therefore, miners usually work in the same network at the same time. If the nonce is found, the bitcoins will be shared among all miners according to their performance. Miners ultimately earn bitcoins.
What do you need to mine Bitcoin?
There are several ways to mine bitcoins. On the one hand, you can mine bitcoins from home with so-called ASIC miners, and on the other hand you can operate cloud mining.
Cloud Mining
In cloud mining, the software and the required hardware components (miners) are rented by an external company for a fee in a cloud, and the scraped bitcoins or old coins are credited directly to the wallet. How cloud mining works in three steps:
- Set up wallet (if not already available)
- Rent cloud miners
- Mine bitcoins
A provider for cloud mining is Genesis Mining (including German support).
Cloud Mining from Bitcoin, Ethereum, Dash, Monero and more.
Mining Bitcoins
If you want to mine Bitcoin yourself from home, you need the following hardware components.
The right bitcoin miner hardware is crucial. At first, it was still possible to mine bitcoins with your own computer and a good graphics card, but today this is only possible with professional Bitcoin miners. These have built special ASIC chips, which are only suitable for the mining of bitcoins.
The most efficient bitcoin miner at the moment is Bitmain’s AntMiner S9 . The S9 must be connected via LAN cable to a router. Then the miner can be configured via the web browser. There is no additional device or software required because it is a standalone miner.
The miner can be operated with standard computer power supplies. It is cheaper, however, to directly order a matching power supply from Bitmain.
Of course, the mining can also operate in a larger style and professional. CryptoBoost eg offers a complete package. It consists of a fully remotely controllable 144-min. Container, a secure location with cheap and green electricity and all around service. Anyone who wants to invest professionally as an investor and seize opportunities can do so through an investor-owned company. The establishment of such a “legal unit” is also part of the service of CryptoBoost.
Mining Pool
Mining pools work on the idea of collective mining. After all, anyone who scores alone needs much longer to find new blocks. It is almost hopeless since the required computing capacity would be much too large. Remedy here, the so-called mining pools. Here, the required computing capacity of all users is bundled. So you can find new blocks much faster. The pay in Bitcoin is divided according to the computing capacity on the individual users.
Known mining pools include the following:
With the necessary hardware, you can now log in to a reputable mining pool and start there collectively with the Bitcoin mining.
Bitcoin mines with the Raspberry Pi 3
Thanks to the very low power consumption of only 4 watts, the small single board SuperComputer Raspberry Pi 3 is particularly suitable for mining bitcoins. Instead of mining bitcoins with the native graphics chip, we recommend coupling several ASIC USB miners specifically designed for bitcoin mining.
Based on a Broadcom BCM2837 system, the Rasberry Pi has a 1.2 GHz quad-core CPU, a VideoCore IV graphics card chip and 1 GB RAM. In addition, the small computer can be connected via HDMI to any monitor or TV and operated via mouse and keyboard (USB). The Raspberry Pi 3 runs on both Windows and Linux (Ubuntu).