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Explaining Bitcoin mining to a beginner

By Guardian Nigeria
21 July 2022   |   8:02 pm
Bitcoin mining is a process that helps secure the Bitcoin network and allows miners to create new bitcoins. Miners achieve this by solving a complex computational problem that requires significant computing power. Trade Cryptos stable coins, bitcoins and other coins on the most trusted platform bitcoins-era.nl Today, miners use powerful computers that specifically serve the mining…

Bitcoin mining is a process that helps secure the Bitcoin network and allows miners to create new bitcoins. Miners achieve this by solving a complex computational problem that requires significant computing power. Trade Cryptos stable coins, bitcoins and other coins on the most trusted platform bitcoins-era.nl

Today, miners use powerful computers that specifically serve the mining purpose, often called ASICs. Bitcoin mining’s processing power has increased dramatically over time, making Bitcoin mining a less profitable venture for individual miners.

Consequently, miners form mining pools by working together to share resources and rewards. When a mining pool solves a block, the pool members share the awards according to their contributed processing power.

Bitcoin Mining Definition
In simplest terms, Bitcoin mining is the process of creating or discovering new bitcoins. The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus.

Also, mining is the mechanism the network uses to introduce Bitcoins into the system. And the network pays miners any transaction fees and a “subsidy” of newly created coins.

The first thing anybody new to Bitcoin mining should know is that there are no physical bitcoins anywhere. Only records of Bitcoin transactions between various addresses, with balances, increasing and decreasing in their “wallet,” exist.

The network would reject the transaction as invalid if you tried to spend or transfer a Bitcoin that isn’t entirely yours, not wholly backed by Bitcoin in your wallet.

The actual process of creating a new Bitcoin is pretty complex and requires significant computing power. So people have designed specialized computers for mining, called ASICs. 

Who is a Bitcoin Miner?
A Bitcoin miner is anyone with a computer that can solve the computational problem required to validate a block of Bitcoin transactions.

When someone sends a transaction, it is broadcast to the network and verified by all nodes. Then, the transaction goes into a “block,” a record of all recent transactions that will be verified and added to the public ledger (the blockchain).

However, verifying and adding transactions to the public ledger is not free. The Bitcoin network rewards miners with newly created bitcoins to incentivize people to verify and add transactions. So, miners are motivated by both the transaction fees and the “subsidy” they receive for validating blocks.

What is a Bitcoin Mining Pool?
In its simplest terms, a Bitcoin mining pool is a miners’ group comprising individuals that work together to validate transactions and share rewards.

Since it’s complicated for an individual miner to solve a block independently, miners often join pools where they work together to find blocks. When a mining pool finds a block, all members share the rewards according to their contributed processing power.

And this allows miners to receive a steady flow of rewards even if they cannot solve blocks independently. It also makes it easier for small miners to participate in the Bitcoin network.

Is Bitcoin Mining for Anyone?
Bitcoin mining is no longer profitable for individual miners using consumer-grade hardware. ASICs have made it difficult for regular people to get involved in mining. Consequently, most Bitcoin mining today is done by large companies with specialized hardware that can mine more efficiently.

However, although it’s not profitable for individuals, Bitcoin mining remains a popular way to earn rewards. People can join Bitcoin mining pools and receive awards for their contributed processing power.

Parting Shot
Bitcoin mining is vital in validating and adding transactions to the public ledger, called the blockchain. The network rewards miners with newly created bitcoins and transaction fees. However, its profitability for individual miners has reduced significantly due to the specialized nature of mining hardware. Nevertheless, people still participate in Bitcoin mining pools and earn rewards for their contributed processing power.