Bitcoin mining
Bitcoin mining is the verification of the bitcoin transactions before recording that information in permanent public ledgers.
Some 17-18 million bitcoins out of a total supply of 21 million have been mined as of today. That effectively leaves roughly 3-4 million bitcoins still up for grabs.
Introduced in 2009 by Satoshi Nakamoto, Bitcoin is a peer-to-peer currency transfer technology that eliminates intermediaries like banks, agents, brokers, and even governments in transactions.
Bitcoin transactions are advantageous because they’re quicker, secure, transparent, and cost less than the conventional FIAT currency transactions.
Bitcoin mining utilizes the blockchain concepts of SHA 256 public distributed ledger and the proof of work.
Understanding Bitcoin Mining
Mining is accomplished by solving a complicated mathematical puzzle known as the proof of work. The miners outcompete with each other to get rewarded for validating the bitcoin transactions in the network.
To solve the puzzle, the miners keep generating new SHA 256 hash values until they land on an amount less than the target.
Miners are required to vary a nonce to produce a lower hash value than the set target. This target is also referred to as the predefined condition of the puzzle. Currently, each solved puzzle block awards the miner with 12.5 bitcoins.
Mining is an energy-intense process that takes roughly ten minutes to frame a new block. The proof of work or the set target gets adjusted every 2,016 mined blocks. Therefore, the target changes once every two weeks.
The mining difficulty is calculated by dividing the first block’s hash target by the current block’s hash target.
Nowadays, miners are pooling together resources to increase the chances of solving a block. They later split the 12.5 bitcoin reward depending on each miner’s help in the mining process.
Mining Tools
In the beginning, miners relied on conventional CPUs to solve the cryptic mathematic puzzles. The process was tedious and incredibly time-consuming.
Later, miners switched to using GPUs. The latter hardware was fast, but it consumed a lot of electrical, making the mining process less profitable.
Nowadays, miners use the application-specific integrated circuit (ASIC) hardware to mine bitcoin and other emerging cryptos. ASIC hardware is energy-efficient, and they come with higher computing capabilities.