Bitcoin operates as a peer to peer network.This means that everyone who uses Bitcoin is a tiny fraction of the bank of Bitcoin.
But where does Bitcoin come from?
With paper money a government decides when to print and distribute money. Bitcoin doesn’t have a central government. With Bitcoin technology , miners use special software to solve math problems. These are issued a certain number of bitcoins in exchange. This provides a smart way to exchange currency. So this creates an incentive for more people to mine.
Since miners are required to approve bitcoin transactions, more miners means a more secure network. The bitcoin network automatically changes the difficulty of math problems depending on how fast they are being solved.
In the early days bitcoin miners solved these math problems with the processors and their computers. Soon they discovered that the graphics card that we use for gaming and other high processor works could be a better option for mining. And it really suits to this kind of works. These are fasters but use more electricity and generate a lot of heat.
The first commercial bitcoin mining products included chips that were reprogrammed for mining bitcoin. The chips were faster but more power consuming.
Application Specific Integrated Circuit(ASIC) chips are designed specifically for bitcoin mining.
ASIC technology has made bitcoin mining a lot faster while using less power.
As time goes on, Bitcoin becomes more popular and people who want to mine that grows high in number. Mathematical problems get more complex and hard to mine for that.
Prevent this, miners from all over the world have developed a way to work together in pools.
Pools of miners find the solution faster than their individual members. In the pools, each of miners are rewarded proportional to the amount of work the miner provides.
Mining is an essential part of bitcoin that ensures fairness while keeping the bitcoin network safe and stable.
As we keep knowing, mining is a tough job to do. It has some profitability factors to acknowledge.
Finally, should I mine bitcoin?
It’s important to keep in mind that sometimes there might be better alternatives for mining in order to produce a higher return on your investment.
For say, depending on bitcoin’s price, it might be more profitable to buy bitcoins instead of mining them. Also it can be profitable to go for altcoin. Altcoin can still be mined with GPUs like Ethereum, Zcash or Monero.
– Al-Amin Ifty/ Intern, YSSE