Bitcoin has been the trending cryptocurrency of the year. With all the awareness going around, it has become popular among the investors and first-timers who want to experience trade using the coin. That is because of the peculiar and unique features that it has.
Bitcoin has come to change the way you and I do business. you can transact with any individual across the borders with no restriction at all. It makes the business transaction more secure since transaction takes place in an open portal and can be verified.
For many business people who don’t like restrictions when it comes to transactions, that have embraced Bitcoin as a mode of exchange. That comes with the privacy in that you will remain unanimous in the whole transaction, sounds good right?
With all the good things that the bitcoin has to offer, there are also questions that are associated with the coin. One of the most complicated and can be tedious to answer is the question of how the coin comes into existence.
They say this is an online currency that is decentralized, how is it created? You understand well that when it comes to the other fiat currency, there is a central bank that is involved in the making and circulation of the currency. How does the bitcoin come to be?
Well, it is the process by which new bitcoins are made and released. It is also how transactions are verified and added to the block chain public ledger. For the question of how the bitcoin comes to be, there is the answer, by mining.
According to many experts, mining is a complex process that involves a lot of work and computing knowledge to be able to do so. It can be painstaking and expensive and the only positive thing about it is the reward. Many are advised to keep off unless it is a hobby you want to explore.
If you are thinking of being a minor in the industry or you are interested in knowing ho bitcoin comes to existence, read along as I take you through the various factors involved for a new bitcoin to be confirmed or to exist.
What it takes to be a miner
Mining is the only way that new bitcoin is released into circulation. That means if there were no miners, we would still be stuck in the initial bitcoin that Santoshi Nakamoto invented. That means there would be no more currency in the market to trade with an exchange.
Through mining, the system has gained trust. That is because the transaction can be confirmed and new once released to circulation. Doing this makes the whole exchange secure and more open to changes since miners contribute to the opinion of future changes.
With that said, it is good to know hat it takes to be a miner. That will prepare you for what you want to get yourself into and if you are curious to know, then you will have the information that you want. For you to be a miner you need to have the following;
- Get the hardware
Yes, you need to get the tools of work if you really want to start mining. You ill must have the ASIC, a specialized hardware specially designed for the mining process. Initially, the bitcoin mining was made using a CPU from a normal desktop computer. What happened next?
That proved to be expensive since it consumed a lot of power and the speed was wanting. This saw the emergence of graphics cards or graphics processing unit that are more efficient and effective than the CPU which the innovator used.
With the popularity that came with the GPU, it made the hardware dominant before the emergence of the ASIC. The hardware was released in 2013 and was specifically designed to mine bitcoin. since then, the hardware has been improved to perform better and more efficient.
Mining using the CPU, GPU or older ASIC proved to be costly due to the cost of energy consumption and since mining is a competitive process, you need to have a more improved and well-functioning hardware like the new improved ASIC.
- You need to select a pool
A pool is here you will be doing your mining from. You have an option of doing it alone without a pool but the outcome on you on which is called the solo mining will be little. You need to find a pool so that you can share your hash rate to increase the income that you will receive.
Once you work as a pool, the return will be more since the hash rate will be increased. Once you are paid the rate, it will be divided according to the percentage of the hash rate that you contributed to the 12.5, that is the total reward.
- Get bitcoin mining software
Getting the hardware won’t be enough for you to start mining. You will need to have a software here you ill hook your mining hardware in your desired pool the work of the software is to point to your hash and make the mining possible.
Hen you use a software, it will tell the pool which bitcoin address your payout will be sent to. You can easily get your soft is on your device. By doing this, mining and payment of the outcome will be easier and more efficient for you as a miner.
- Make sure it is legal in your country
Yes, you don’t want to run an illegal business in your country, do you? I bet you don’t. to make your mining process easy and more comfortable without getting in trouble with the law, you need to make sure that what you are doing is according to the laws of your country.
You can do this by consulting the relevant legal counsel and try to ensure as much as possible about the legal standoff the mining process. The good thing is that mining is legal in many countries and it can be possible even in your country, do some research and find out.
- How much will you gain for it
Like mentioned earlier, mining can be painful and tedious if you are not up to the task. You need to ask yourself if your output will be worth your input. Setting up a mining system can be expensive, and you need to know hat you need from all this.
You don’t have to be a minor for you to own cryptocurrency. That means if you evaluate yourself and see that it is not worth your time, there are other ways in which you can get the coin. You can buy using your fiat currency or you can receive payment with the coin.
After it is all set and done, it is time to get to the process. You need to ensure that what is stated above is already set before you proceed to the mining. For you to mine successfully, you must pass through the following process;
The process involved in mining and confirming bitcoin transactions by miners
For the process to start, there must be a buyer willing to make payment using the bitcoin. the buyer ill agrees with the seller that he or she will make the payment using the bitcoin currency. After agreeing, the buyer goes ahead and initiate the process through making the payment.
- Announcement is made
After the buyer makes the payment, an announcement is made. This is done by the buyer wallet to the seller wallet about a bitcoin payment. This is called a transaction. All this is done under the watch of a full done which act as a temporal wallet for the blockchain.
That is where the full nodes, which are temporally custodians of the blockchain checks the buyer spending against other spending transaction. That is to ensure that no single payment is made tice also known as double spending.
If the transaction is clean and there is no conflict or any suspicious activity, full node announces transaction across the bitcoin network. It should be noted that at this stage, the transaction has not entered the blockchain, so the seller should not send the goods yet until the process is verified.
- Processing by miners
Miners function like full nodes. Their work is to inspect and maintain a full copy of the blockchain. They check and carefully monitor the network for newly announced transactions. Miner later package the current blockchain to be acceptable to the rest of the network
- Blockchain confirmation
Miners need to solve the puzzle containing the buyer pays to the seller and later announces the newly solved block to the network. Once this is done and is accepted, it is recorded to the blockchain and that will mark the end of the payment process. The seller can send the goods to the buyer.
The amount of new bitcoin released with each mined block is known as block reward. In 2009, the reward as at 50 and now, it has dropped to 12.5 and is still dropping. That is since more and more bitcoin is being mined and is approaching the 21 million dead mark.
Solving the puzzle
Yes, mining involves solving a puzzle for you to make new bitcoin to go to the circulation. Is the puzzle hard? Well, it depends with your determination to get it right. however, they have a process of making mining more difficult to reduce the number of bitcoin being released.
How do they do that? They do that by making the puzzle even harder when they see more effort being put into solving the puzzle. Difficulty can be adjusted b protocol in every 2016 or after every 2 weeks. That is to regulate the number of bitcoin being released.
That will also apply even on the opposite side. That means hen there is little effort shown to solve the puzzle, the math is made easier for miners to be able to release more bitcoin into circulation. All this shows that it is your effort that will prove whether the puzzle is hard or easier for you.
Advantages of being a miner
- You earn from it
Yes, you have a lot to gain when you invest in mining. If you put everything in place and make sure your power consumption is less, you are set to earn a lot of reward from mining. It can be a source of richness for you if you do what is needed.
You also get to earn cryptocurrency without having to spend your fiat currency on it. that is because you will be rewarded using a fraction of the bitcoin which goes straight to your wallet for you to spend. You can easily accumulate wealth his way.
- Have a say in the bitcoin currency
By you mining the coin, you get to keep the currency in circulation. That means you play an integral role when it comes to bitcoin existence. You also have a voting privilege when it comes to making changes as far as bitcoin protocol is concerned.
You need to really think hard before you start mining. That is because it will cost you a lot to install a mining centre not to mention the amount you will spend on the software and the hardware. That can be money consuming on your part if you are not ready for it.
Yes, it involves a lot of participation on your part when it comes to mining and verifying the transaction. That means you need to dedicate your time to make sure you follow the network for any transaction that will be done.
When it comes to cryptocurrency mining, there is a lot that is involved. Not that you cannot master hat is needed but you need to invest a lot of your money and time to do this. If it is your hobby and you are set to do it, it can be profitable for you and worth trying. Go for it.